NZD/USD traded higher on Thursday, breaking above the neckline of a complex inverted “head and shoulders” formation. This, combined with the fact that the rate is trading above a new tentative upside support line, suggests a positive short-term picture. However, we would like to see the pair clearing some key resistance obstacles, as well as the 200-EMA before we get confident on larger bullish extensions.
We believe that the move which could wake up more bulls is a break above the 0.6348 zone, marked by the high of September 25th. This could initially carry advances towards the 0.6370 zone, the break of which could aim for the 0.6390 area, near the peak of September 16th. Another break, above that zone, may pave the way towards the 0.6410 territory, defined by the high of September 13th.
Taking a look at our short-term oscillators, we see that the RSI rebounded back above its 50 line and is now pointing up, while the MACD, already positive, has just poked its nose above its trigger line. These indicators suggest that the rate may have started picking up positive speed and support the notion for some more bullish trading, at least in the short run.
On the downside, we would like to see a clear dip below 0.6275 before we start examining whether the bears have taken the reins. Such a move would discard the H&S pattern and would also bring the rate below the aforementioned upside support line. We would then see declines towards the low of October 3rd, at around 0.6254, the break of which may allow the sellers to put the 0.6220 zone on their radars. That zone is marked as a support by the low of October 2nd.
