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New Zealand Dollar: Time For A Downside Correction

ByAxiory
AuthorTomasz Wisniewski
Published 07/07/2020, 06:27 AM
Updated 01/03/2021, 09:10 AM

The first Monday in July started off positively with indices heading higher. This could have been triggered by traders’ good mood following the US Independence Day, or optimism over the COVID pandemic, perhaps it’s the freshly printed US dollars from the Federal Reserve, flooding the market. Instead of focusing on what has happened, let’s focus on what will probably happen next.

Let’s start with the S&P 500, on Monday it broke a crucial mid-term resistance on the 3155 point. This resistance has held its own since mid-June, buyers tried to break it a few times but failed, which makes it a significant level. This area was broken during the Asian session and the price remained above it during the European and U.S. hours. The S&P 500 tested the broken resistance as a close support during the beginning of the European session on Tuesday. It’s crucial to hold the price above this support level to get a mid-term buy signal. Otherwise, we may experience a false bullish breakout pattern, which may be pretty unpleasant for demand.

Moving on the NZD/USD, the price of the pair is currently correcting the bullish movement that happened after the defense of the 0.639 support level and the breakout of the dynamic down trendline. Here, the price is also testing the broken horizontal resistance as a close support, which can work out for sellers.

Meanwhile, the NZD/CAD’s price is bouncing from the major down trendline on the weekly chart. As long as the price stays below the trendline, sentiment is negative. More will be revealed on Friday when we can view the shape of the weekly candle. Anything with a bearish body, will be considered a sell signal.

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