NZD/USD falls to a low of 0.6791 after breaking below the 200-hour MA
Price now looks towards a test of yesterday’s low of 0.6782 and if that breaks it opens up a move back towards the swing region around 0.6750 for starters. It’s been a bit of a rough day for both the aussie and kiwi as both currencies are weighed down against the rest of the major bloc.
There isn’t very much to go on for the drop here in the kiwi and aussie, but some traders are citing a drop in short-term yields as the cause. Looking at that, there is a bit of a decline there but nothing really substantial. However, do take note that today is very much lacking in liquidity so there’s that.
From a technical perspective though, NZD/USD is continuing its decline after failing to move above the topside trendline resistance overnight and then breaking back below the 100-hour MA (red line). Now that price falls back below the 200-hour MA (blue line) as well, the near-term bias turns more bearish.
Looking at the daily chart, buyers have been unable to find a way to crack above the 200-day MA (blue line) in the recent upside move and now the risk here is that the daily close will firmly fall back below the 38.2 retracement level @ 0.6796. That will pave the way for a move back lower towards the 28 August high @ 0.6727 before the swing region around 0.6690-00 comes into play. Thereafter, the 100-day MA (red line) will also be another key support level to watch out for.
I’m never a fan of breakout moves happening during thin liquidity time but the chart here is evident that sellers are slowly taking back control after an attempt at a key break to the upside (200-day MA) has failed. Therein, the risk-reward play favours shorts more in my view but one can argue that the dollar is headed for troubling times with the Fed looking to pause its tightening cycle.
Hence, I wouldn’t expect a run to the downside back towards the year’s lows but you can always pick decent pips following the flow and the technical breaks above.