Technical Analysis: NZDUSD Reversed at 200-Day SMA – Action Forex
The NZDUSD pair had been showing signs of recovery since early August, gradually climbing back up from its previous low of 0.5851 in April. However, this upward momentum hit a roadblock as the price was rejected at the 200-day simple moving average (SMA) following a dovish Reserve Bank of New Zealand (RBNZ) meeting. This rejection by the SMA signaled a potential shift in the currency pair’s trajectory, prompting traders to reassess their positions.
The recent dovish stance taken by the RBNZ, which included a 25 basis point rate cut and hints of a possible 50 bps reduction, added pressure on the NZDUSD pair. This dovish tone put a halt to the recent bullish trend, causing the pair to retreat from its recent highs. As a result, the oscillators deteriorated, but they still remained in a neutral-to-positive territory, indicating a certain level of uncertainty in the market.
Key Levels to Watch
As the NZDUSD pair faces resistance at the 200-day SMA, traders are closely monitoring key levels to gauge the potential direction of the pair. In case of a reversal, initial support is expected at 0.5972, which corresponds to the 23.6% Fibonacci retracement level of the recent upswing from 0.6368 to 0.5851. If this level fails to hold, the pair could further decline towards the April support level of 0.5938. A breach of this support zone could open the door for a retest of the 2024 low at 0.5848, a critical level that has proven to be a strong support in the past.
On the other hand, if the bulls manage to regain control, the NZDUSD pair could aim for the 38.2% Fibonacci retracement level at 0.6048. A successful break above this level could pave the way for a test of the 50-day and 200-day SMAs, followed by a potential move towards the 50.0% Fibonacci level at 0.6109. Further upside momentum could lead the pair towards the 61.8% Fibonacci level at 0.6170, offering a possible target for bullish traders.
Market Sentiment and Outlook
The recent developments in the NZDUSD pair have sparked mixed sentiments among traders, with some anticipating a prolonged downtrend while others remain hopeful for a bullish reversal. The dovish RBNZ meeting has certainly shifted the market dynamics, impacting the pair’s near-term outlook.
Traders are advised to closely monitor key levels and technical indicators to gauge the market sentiment and potential price movements. A decisive break above the 200-day SMA could signal a resumption of the bullish trend, while a sustained decline below key support levels could indicate further downside pressure on the pair.
In conclusion, the NZDUSD pair’s rejection at the 200-day SMA following the dovish RBNZ meeting has altered the currency pair’s near-term trajectory. Traders are advised to remain vigilant and adapt their strategies accordingly to navigate the evolving market conditions.
