Falls to 3-week lows, vulnerable to further decline

• The NZD / USD confirms a bearish break below the support of the shoulder-head-shoulder pattern.
• The bears could now aim to test the 0.7040 support before falling to the round 0.7000 level.
• A sustained move above the 0.7235 region is needed to nullify the bearish bias.

The NZD / USD pair extends last week’s heavy losses and witnessed some selling for the second day in a row on Monday. Momentum has dragged the pair to a three-week lows around the 0.7100 region at the start of the European session.

From a technical perspective, the NZD / USD pair has confirmed a bearish breakout of the shoulder-head-shoulder pattern support on Friday. The subsequent decline has already set the stage for an extension of the current corrective decline from multi-year highs.

The negative outlook is reinforced by the fact that the oscillators on the daily chart have started to move into bearish territory. Therefore, a subsequent drop below the 0.7100 level, towards the test of the 0.7040 support, seems like a clear possibility.

The downward movement could extend further towards the key psychological level of 0.7000, which represents the target of the bearish pattern. This, in turn, should act as a key point for investors and help determine the short-term movement of the NZD / USD pair.

On the other hand, the breakout point of the pattern’s support, around the 0.7145-50 region, should limit any attempts to recover. This is closely followed by resistance at 0.7170-75, which if decisively overcome could trigger a short covering move.

However, any subsequent movement beyond the 0.7200 level could still be seen as an opportunity for the bears and remain limited near the 0.7235 resistance zone. Only a convincing breakout of the aforementioned barrier will negate the short-term bearish bias.

NZD / USD 4 hour chart

NZD / USD technical levels