NZDUSD could be in for a long-term selloff as price formed a double top on its 4-hour time frame. The pair has yet to break below the neckline at the .7200 major psychological support to confirm the downtrend, which might last by around 220 pips or the same height as the chart formation.
The 100 SMA has crossed below the longer-term 200 SMA to indicate that the path of least resistance is to the downside. This suggests that bearish momentum is starting to kick in. Stochastic is also turning lower to confirm that sellers are taking control.
However, if support at the neckline continues to hold, price could still bounce higher to make another top around .7420 or probably test the nearby area of interest at .7280.
Economic data from New Zealand has been upbeat today as the ANZ commodity prices report showed a 2.8% gain in price levels, much higher than the earlier 0.7% uptick. This could lead to stronger inflationary pressures down the line, lifting the odds of an RBNZ hike at some point.
US ISM non-manufacturing PMI is due today and a strong result could lead to positive expectations for Friday’s NFP. In that case, the dollar could keep advancing on higher Fed rate hike expectations for this month. On the other hand, disappointing figures could force the US currency to retreat.
Risk aversion has been in play for quite some time, with trade war fears also weighing heavily on commodity currencies. Recall that Trump plans on imposing higher tariffs on steel and aluminum imports to protect US producers. At the same time, global tightening prospects could dampen demand for commodities.
By Kate Curtis from Trader’s Way