- NZD/USD bears eye a continuation below structure.
- Bulls could be lurking at a key area of potential support.
NZD/USD remains on the backfoot following the Reserve Bank of New Zealand confirming it would ease mortgage loan-to-value ratio (LVR) restrictions from June 1. The technical outlook is bearish for the meanwhile, but there could be prospects of a bullish correction for the week ahead as the following illustrates.
NZD/USD weekly chart
The weekly chart shows the M-formation´s last leg penetrating prior lows that might be regarded as stucture and such a move signifies a market that is breaking down. However, in the meanwhile, a correction could be coming up.
NZD/USD daily chart
The market is headed toward a support structure but should the bulls turn up, a correction towards 0.6080-0.6112 could be on the cards.
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The NZD/USD has been on a wild ride in recent weeks, trading within a narrow range for much of the period. Now, however, it looks like the bullish momentum that has been present since the start of June is giving way to bearish pressure.
The NZD/USD has been trading within a narrow range between 0.66450 and 0.66905 since late April. This range was tested multiple times, but buyers and sellers were unable to break out. However, that all changed last week when the pair closed below the 0.66450 support for the first time in two months. The move marked a key break in structure and signaled that the bearish forces were gaining the upper hand.
The break in structure has increased the probability of further downside action as the bears look to extend the current move lower. The price is now trading at its lowest level since May 26th, and price action could soon move to the 0.65000 psychological level.
As far as buying opportunities are concerned, any upside rally should be short-lived as long as price remains below 0.66450. Furthermore, any rebound will likely run out of steam around the 0.67000 level, where a cumulative Fibonacci resistance level is located.
In conclusion, it looks like the NZD/USD is transitioning to a bearish outlook, with the recent breakdown of structure signaling a move lower in the coming days and weeks. Buyers should avoid entering the market at current levels until the price regains the 0.66450 level. Any upside rally should likely run out of steam around the 0.67000 level.