Bearish Continuation Flag Pattern Spotted on the 1-Hour Chart

• The NZD / USD has struggled to hold its intraday gains at the one-week highs.
• The formation of a flag pattern supports the prospects for further losses.

The NZD / USD pair has returned a significant portion of its intraday gains to week-long highs and is trading in neutral territory, around the key psychological level of 0.7000.

The recent bounce from four-month lows has stopped near resistance marked by the upper bound of an upward sloping channel. Given the sharp drop last week, the aforementioned channel constitutes the formation of a bearish continuation flag pattern on the hourly charts. The negative outlook is reinforced by the fact that the technical indicators on the daily chart are still in bearish territory. This, in turn, supports prospects for further losses amid strong bullish sentiment around the US dollar.

Meanwhile, the oscillators on the 1-hour chart have been gaining some positive traction and rebounded from the bearish zone on the 4-hour chart. The technical setup favors intraday bulls, although any positive move could still be seen as a selling opportunity. That said, it will be prudent to wait for a sustained break below the 0.6990-85 confluence region before opening new bearish positions. This area comprises the trend channel support and the 100 hourly SMA, which should act as a key point for traders.

Some continuation weakness will confirm a further bearish breakout and will drag the NZD / USD pair towards multi-month lows, around the 0.6945-40 region. The downside momentum could extend further to challenge the round 0.6900 level.

On the other hand, any recovery attempt could continue to face stiff resistance and remain limited near the upper end of the channel. The mentioned barrier is close to the 0.7030-40 region, which if removed could trigger some aggressive short-covering move.

NZD / USD 1 hour chart

NZD / USD technical levels