NZDUSD has been trending lower since breaking below the neckline of a head and shoulders pattern. Price is also moving below a descending trend line connecting the highs since mid-September.
A pullback to this trend line appears to be underway after the pair bounced off the .6825 level. Applying the Fib tool on the latest swing high and low shows that the 50% level lines up with the trend line at the .7000 handle.
The 100 SMA is still below the longer-term 200 SMA, so the path of least resistance is to the downside. The 200 SMA is close to the Fibs and trend line resistance, potentially acting as the last line of defense in this downtrend correction. Stochastic is moving up to reflect bullish presence but is nearing overbought conditions.
The RBNZ decided to keep interest rates on hold as expected at 1.75% but the central bank adjusted its forecast for when New Zealand would hit its inflation target by a few months earlier. This also meant adjustments to its OCR timeline.
Apart from that, Acting Governor Spencer also assured that proposed government changes to the central bank mandate would have little effect on economic conditions.
Meanwhile, the US dollar is being bogged down by setbacks in tax reform as Senate is set to unveil their version of the bill within the week. This is said to have huge differences from the Congress version, which will be voted upon next week.
By Kate Curtis from Trader’s Way