NZDUSD pair testing broken trend line resistance, strong challenge for the bulls

There has been a strong bullish rally in the NZDUSD pair after it hit the critical support level at 0.67828.The bulls managed to make a series of higher highs associated with higher lows which clearly demonstrates the establishment of a medium-term bullish trend for this pair. Most of the professional investors managed to ride the medium term bullish trend by using the price action confirmation signal formed at the daily chart. However, currently, the pair is testing the 61.8% bearish retracement level at 0.72636.Though the bulls managed to breached the 62.8% retracement for a short period of time but ultimately the sellers took control over the market and managed to keep the price down below the 0.72636 level prior to the closing of the week.

NZDUSD daily chart analysis

Figure: NZDUSD pair testing the 61.8% retracement level in the daily chart

From the above figure, it’s very obvious that the Kiwi bulls have a tough time in the upcoming week since it has to clear the 61.8% retracement level before showing any significant bullish movement. A daily closing of the price above the critical resistance level at 0.72636 will confirm the establishment of the medium-term bullish trend. On the contrary, failing to break the 61.8% retracement level will ultimately lead this pair towards the nearest support level at 0.71706.From that level, we might see some decent bullish bounce but taking any long order at that level will be an immature act.

NZDUSD weekly chart analysis

Figure: NZDUSD testing 200 weekly SMA and broken trend line resistance

In the weekly chart, we have a very critical situation for the long-term investors. Currently, the pair is testing the 200 weekly SMA and the broken trend line resistance. If the bulls manage to clear the 200 weekly SMA then we have a strong chance to see a long-term bullish reversal. A weekly closing of the price above the critical resistance level at 0.72943 will ultimately lead this pair towards the next critical resistance level at 0.75447.This level is going to play a very crucial role for this pair and most of the professional long-term investors will be looking for bearish price action confirmation signal to execute their short order in favor of the long-term trend. If the bears manage to take control of the market from that level we will see a sharp drop in the NZDUSD pair. The first bearish target for this pair would the 100 weekly SMA support level. We might see some ranging movement from that level but a clear break of 100 weekly SMA will ultimately challenge the low of 19th November 2017.

Considering the all the technical parameters, it’s better to stay on the sideline until we get a bearish price action confirmation signal in the daily chart. However, you can also short this pair at this current level but it would be considered as an aggressive entry.