NZDUSD has formed a double top pattern visible on its daily time frame, hinting that a longer-term selloff is in the cards. The chart pattern is approximately 400 pips in height so the pair could be in for the same amount in losses.
Price has yet to break below the neckline of the formation around the .6500 major psychological level before confirming this potential drop. The 100 SMA is below the longer-term 200 SMA, which means that the path of least resistance is to the downside.
However, stochastic is already indicating oversold conditions so sellers might need to take a break soon. RSI is also nearing the oversold region, eventually drawing some buyers to the table or spurring profit-taking activity. For now, the 100 SMA also appears to be holding as a dynamic support zone.
Last week, jobs data from the US came in stronger than expected, as the economy added 292K jobs in December. To top it off, previous month’s revisions amounted to an additional 50K in hiring gains. However, wage growth was absent in December, downplaying FOMC expectations that wage inflation could support consumer price levels.
In New Zealand, the GDT auction revealed another drop in prices, signaling that the downturn in the dairy industry isn’t over yet. There are no major reports lined up from New Zealand this week, which suggests that the Kiwi might take its cue from Australian data and overall market sentiment.
Over the weekend, CPI readings from China came short of expectations, keeping further PBOC easing expectations in play. Another round of losses in China’s stock market could keep a lid on gains among commodities and comdolls.
By Kate Curtis from Trader’s Way