New Zealand dollar technical outlook

NZD/USD short-term technical forecast – neutral

After a spectacular six-week rally, the New Zealand dollar appears set to shed some of its recent gains against the US dollar.

NZD/USD, up 14% since mid-October, is now testing solid resistance on the 200-day moving average –a possibility highlighted in the previous update. In addition to the long-term moving average, there is a resistance on a downtrend line from June and a slightly upward sloping trendline from July.

NZD/USD daily chart

While there is no sign of reversal of the uptrend yet, even on intraday charts, negative momentum divergence on the daily and intraday charts (rising price associated with declining or stalling of momentum) indicates that the rally is showing signs of fatigue.

If history is any guide, a retreat would not be surprising. The rallies in late 2021 and early 2022 ran out of steam at the long-term moving average. The pullback in NZD/USD was preceded by a negative momentum divergence, similar to the current divergence.

NZD/USD 240-minutes chart

Any retreat could open the way toward last week’s high of 0.6205. Any break below would confirm that the upward pressure had eased, opening the way toward a key cushion at the November 17 low of 0.6060. This support is fairly strong and would be tough to crack, at least on the first attempt. Indeed, the floor could provide a platform for a retest of Thursday’s high of 0.6290.

Any retreat could open the way toward last week’s high of 0.6205. Any break below would confirm that the upward pressure had eased, opening the way toward a key cushion at the November 17 low of 0.6060. This support is fairly strong and would be tough to crack, at least on the first attempt. Indeed, the floor could provide a platform for a retest of Thursday’s high of 0.6290.

NZD/USD weekly chart

Looking beyond the short term, NZD/USD last month held major support at the 2020 low of 0.5465. The rally since setting a 31-month low has been convincing, raising the prospect that an interim low is in place.

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