Hit to three-month lows and remains vulnerable below the 0.7100 level

• The NZD / USD witnessed strong selling on Tuesday and plummeted to three-month lows.
• The oversold conditions on the 1 hour chart warrant some caution before opening new bearish positions.
• The pair still looks vulnerable to challenging the 0.7000 level.

The NZD / USD pair has continued to lose ground during the early part of the European session on Tuesday and has fallen to three-month lows, around the 0.7055 region in the last hour.

Sustained weakness below the 100-day SMA has been considered a key trigger for bears. A subsequent breakout of the horizontal support at 0.7100, which coincides with the 38.2% Fibonacci retracement of the strong positive move from 0.6511 to 0.7466 has triggered some aggressive technical selling and could have set the stage for further weakness.

The negative outlook is reinforced by the fact that the technical indicators on the daily chart remain deep in bearish territory and are still far from being in the oversold zone. Therefore, a further decline towards intermediate support near the 0.7030 region, en route to the key psychological level of 0.7000, seems like a clear possibility.

That said, the oscillators on the 1 hour chart are already showing extremely oversold conditions and warrant some short-term consolidation or a modest bounce before the next dip. That being said, any recovery attempt will now be seen as a selling opportunity and risks fading quickly near the breaking point of the 0.7100 confluent support.

However, some subsequent buying could trigger a short hedging move and push the NZD / USD pair towards the 0.7165-70 resistance zone. Only a sustained force above this region will negate the bearish bias and pave the way for some short-term upward movement.

NZD / USD daily chart

NZD / USD technical levels