Kiwi dollar testing solid support, cautious bulls wait

There has been a decent drop in the NZDUSD pair after it hit the critical resistance level at 0.74333.Most of the professional investors went short from that level after the formation of bearish pin bar in the daily chart. Currently, the pair is testing the critical support level at 0.71842 and we have bullish pin bar formation right at 38.2% Fibonacci retracement level drawn from the low of 17 November 2017 to the high of 25th January 2018.If the bulls manage to drive the price up from the current level, we might see another retest of the critical resistance level at 0.74333 level. On the contrary, if the bears manage to break below the low of 8th February 2018, the price is most likely to head towards the 200 SMA.

NZDUSD daily chart analysis

Figure: NZDUSD rejecting the 38.2% Fibonacci retracement level

From the above figure, you can clearly see a bullish morning star pattern in the daily chart. Most of the aggressive traders have already gone long but the conservative traders are waiting for a minor retracement towards the 38.2% Fibonacci retracement level. However, a daily closing of the price below the critical support level at 0.71786 will invalidate the current bullish price action signal.

NZDUSD weekly chart analysis

Figure: Price trading at the 200 weekly SMA

In the weekly chart, the price is trading at a critical zone and the bearish retracement is still not completed. If the price breaks below the major resistance level at 0.71736 we will see a sharp drop towards the 100 weekly SMA. From that level, we might see some solid bullish bounce in the price and most of the conservative traders will be looking for bullish price action confirmation signal to execute fresh long orders.

However, if the dollar bulls manage to regain its bullish strength the price might drop towards the weekly trend line support level at 0.6900.This level is very crucial for the long-term buyers since a break below the critical support level at 0.6900 will confirm the end of the medium term bullish rally. On the contrary, if the bulls manage to clear the critical resistance level at 74301, we will have a temporarily bottom formation near the 0.6877 level. A weekly closing of the price above the critical resistance level at 0.74301 will ultimately lead this pair towards the next major resistance level at 0.7700.This level is going to provide a significant amount of selling pressure to the NZDUSD pair and any bearish price action confirmation signal will be an excellent opportunity to short this pair on a long term basis. However, a break above the critical resistance level at 0.7700 markets will confirm the end of a long term bearish trend for this pair. Considering the all the technical parameters buying the pair at the deep with a tight stop below the of 8th February 2018 will be a justified act.