NZDUSD is hovering a tad below the midpoint of the rectangle that has been in place since February 2023, as market participants have been unable to stage a sustained move up to now. However, since the failed late-May bearish breakout, a series of higher highs and higher lows has been in place with the bulls aiming for the next peak to occur above the July 14 high of 0.6411. Maybe, the continued convergence of the simple moving averages (SMAs) could play a role soon.
This delicate balance is reflected in most momentum indicators. The Average Directional Movement Index (ADX) remains in range-trading territory, and the RSI is hovering a tad above its 50-threshold. Similarly, the stochastic oscillator is trading sideways, very close to its midpoint. However, a bullish divergence appears to be forming since the latest higher low in NZDUSD has been met by a lower low in the stochastic.
Should the bulls feel more optimistic, they would try to keep the index above the 0.6170-0.6215 range and gradually test the resistance set by the 50% Fibonacci retracement of the April 5, 2022 – October 13, 2022 downtrend at 0.6272. If successful, they can then lead NZDUSD higher towards the upper boundary of the aforementioned rectangle at 0.6389.
On the other hand, the bears are keen on breaking the busy 0.6170-0.6215 range and then aim for another bearish breakout. However, they first have to overcome the May 31, 2023 upward trendline and the support set by the 0.6060-0.6092 range that is populated by the 38.2% Fibonacci retracement and the July 14, 2022 low respectively.
To conclude, market participants are in waiting mode ahead of this week’s key events. However, NZDUSD bulls might feel more confident on the back of the developing divergence.