The New Zealand dollar has staged a solid bounce from the 0.7000 level of the foreign exchange market against the US dollar, despite other currencies such as the euro coming under severe pressure.
The improving economic conditions in the antipodean nation and the recent rollback of Covid restrictions across much of the Kiwi economy have helped drive demand for the NZDUUSD pair.
The Reserve Bank of New Zealand is widely tipped to hike rates this month, and this is actually the primary driver of the NZDUSD pair. In fact, traders are betting on a series of rate hikes, and believe that the RBZD has plenty of ammunition to continue down the path of hiking rates.
With the US dollar index breaking to the upside, it is still a dangerous time for the NZDUSD. A pullback in commodity prices could easily send the NZDUSD pair much lower as well.
The technical show that the potential reversal spot is either 0.7000 or 0.6855. Traders have tried the 0.7000 level with some success so far, gains above the 0.7130 level should confirm a meaningful price floor.
According to the ActivTrader market sentiment tool, some 63 percent of traders are bearish towards the NZDUSD pair. As we typically look to fade sentiment biases, this is a good sign for NZDUSD bulls.
NZDUSD Short-Term Technical Analysis
The four-hour time frame shows that a recovery back inside a large ascending triangle pattern is currently underway. This is a good sign for bulls looking for a sustained reversal from the 0.7000 level.
If the breakout holds then a recovery back towards the 0.7200 region seems plausible. If bulls fail to recover the breakout, then a decline towards the 0.6850 level is likely.
NZDUSD Medium-Term Technical Analysis
The daily time frame shows that the pair has survived a technical retest of a large falling wedge pattern. These types of patterns are typically considered to be classic bullish reversal pattern.
According to technical analysis the retest of the wedge is likely to be successful while the NZDUSD pair trades under the 0.7000 level. Fail under 0.7000 and retest of the 0.6855 level seems the next best strategy for the bulls.
See real-time quotes provided by our partner.
