NZD/USD, NZD/SGD – Technical Outlook:

  • NZD/USD is attempting to break above critical resistance.
  • A potential bullish reverse head & shoulders pattern in NZD/SGD
  • What is the extent of the potential upside and what are the key levels to watch?

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NZD/USD SHORT-TERM TECHNICAL OUTLOOK – BULLISH

NZD/USD is attempting to break above an important resistance that could lead to a further rise in the coming days and weeks. However, it would be too soon to conclude if the broader downtrend is over.

NZD/USD is attempting to break above key horizontal trendline resistance at about 0.5750. A decisive break would trigger a minor double bottom (the end-September and early-October lows), pointing to a potential rise towards 0.5900. Improving momentum on intraday charts suggests that the probability of a bullish break is rising. On the upside, there is quite strong resistance of 0.5900 (the 38.2% retracement of the August-September fall), and at the July low of 0.6060, roughly coinciding with the 50% retracement).

NZD/USD 4-Hour Chart

NZD/USD 4-Hour Chart

Chart Created Using TradingView

To be sure, an imminent rally may not necessarily imply a reversal of the multi-month downtrend. The bearish momentum, which appears to be gradually fading, remains intact. So, beyond any short-term rally, the risks are biased towards NZD/USD testing strong support at the 2020 low of 0.5470 sometime in the coming weeks and months. Immediate support is at Wednesday’s low of 0.5660. A decisive break below the support would negate the evolving bullish bias.

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NZD/SGD SHORT-TERM TECHNICAL OUTLOOK – BULLISH

NZD/SGD is similarly attempting to form a short-term base. The cross is attempting to break above key horizontal trendline resistance at 0.8230. In recent days, there have been a couple of failed attempts to break past the resistance – also a sign of how significant the barrier is.

A decisive break above would trigger a minor reverse head & shoulders pattern (the left shoulder at the September 28 low, the head at the October 2 low, and the right shoulder at Wednesday’s low), pointing to a potential rise towards 0.8450. Moreover, the quick swift recouping of the quarter-end losses on the daily chart is a sign that bears are temporarily getting exhausted, raising the probability of a bullish break higher.

NZD/SGD 4-Hour Chart

NZD/SGD 4-Hour Chart

Chart Created Using TradingView

Whether any rebound would set the stage for a sustainable rally remains a question. For one, it would depend on the nature and the extent of the evolving rally. A fast-paced / larger rally would raise the odds for such a case. Clearly, NZD/SGD’s hold above major support at the 2020 low of 0.7925 (hit 0.8000 at the end of September) is a sign that there may not be much room the downside for now, keeping such hopes alive.

Initial resistance is at 0.8335 (the 38.2% retracement of the August-September fall), followed by stronger resistance at the July low of 0.8500. For the medium-term downward pressure to fade, NZD/SGD would need to rise above the 200-day moving average (now at about 0.8875).

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— Written by Manish Jaradi, Strategist for DailyFX.com





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