Key Points:
- Long-term ABC wave could carry the pair substantially lower.
- MACD signal line hinting at a continuation of the long-term downtrend.
- Current support could present a challenge to this forecast.
The Kiwi Dollar’s losses may still have a ways to go before the long-term downtrend finally releases the pair. Specifically, we could even see the 0.6668 handle in the crosshairs as the final stages of a corrective wave take place over the coming week. As a result, it’s likely to be worth one’s while to take a closer look at this generally embattled pair.
First and foremost, whilst the downtrend thatbegan in February probably hasn’t gone unnoticed by many, the fact that this might simply be the latest leg of a much larger pattern may be news to some. In particular, it looks as though this most recent slide represents the ‘C’ leg of a broader corrective ABC wave that took hold in the wake of the last year’supswing. As for what this could mean moving forward, it now looks as though losses for the NZDUSD could extend far beyond where we might have initially expected them to
Indeed, chart patterns aside, a number of other instruments seem to be in favour of an overall bullish phase for the Kiwi Dollar in the weeks and months to come. Namely, we have the parabolic SAR firmly in bearish territory which would usually predispose the pair to move lower moving ahead. Of course, this is in line with the EMA bias which is highly indicative of downside risks. However, the most telling insight comes from the MACD oscillator which is on the verge of seeing a full signal line crossover which would typically precede a notable downtrend.
Despite this rather compelling argument for further losses, an important level of indication to keep an eye on is the 0.6956 mark. Predominantly, the presence of a rather well-tested reversal point is casting some doubt of continued losses in the near-term. However, this price also corresponds with the 76.8% Fibonacci retracement which could also add to fears of a short ranging phase prior to any further downside action. Ultimately, this level should givein, especially if the US fundamental data continues to come in above expectations in the coming sessions so monitor the NFP figures closely moving ahead.
Overall, the technical case for the above forecasted downtrend seems to have some legs, in this author’s opinion at least. As a result, keep a close eye on the Kiwi Dollar over the coming sessions as it could present us with substantial downside potential. Moreover, monitor the fundamental front as any major uptick in the US data could be all that is needed to see the current support smashed and get this downtrend kick started.
