NZDUSD had previously been trading inside a symmetrical triangle formation but broke to the downside. Price then dipped to a low of .6550 before showing signs of a pullback.
Using the Fib tool on the breakout move shows that the 50% level lines up with the broken triangle support around the .6650 minor psychological mark. This could keep gains in check and allow price to resume its drop, possibly to the previous lows at .6550 or much lower. A higher retracement could last until the 61.8% Fibonacci retracement level, which might be the line in the sand for any corrections.
The 100 SMA is slightly below the 200 SMA, indicating that the path of least resistance is to the downside and that further losses are possible. Stochastic is already indicating overbought conditions and RSI is approaching the 80.0 level so sellers might take over soon.
Earlier today, New Zealand printed declines in its producer input and output prices, hinting at weaker inflation prospects down the line. The PPI input figure showed a 1.2% drop while the PPI output figure showed a 0.8% decline.
In the US, the FOMC minutes spurred a bit of a selloff for the dollar, as Fed officials highlighted the increased downside risks to growth and inflation. However, data from the US economy such as PPI and industrial production beat expectations, indicating that it is still on solid footing.
Up ahead, the US Philly Fed index and initial jobless claims data are up for release. The former is expected to improve from -3.5 to -2.9 while the latter could come in at 275K, slightly higher than the previous 269K in claimants.
By Kate Curtis from Trader’s Way