- NZD/USD gained strong positive traction on Friday and rose to a three-week high.
- The technical setup favors the bulls and supports the prospects for further gains.
- A sustained break below the 0.6400 mark is needed to negate the constructive outlook.
The NZD/USD pair received aggressive bids on the last day of the week and rose to a three-week high during the first half of the European session. The bulls are now looking to build on the momentum beyond the 0.6525-0.6530 confluence, which comprises the 200-period SMA on the 4hrs chart and the 38.2% Fibonacci level of the 0.7035-0.6217 drop.
Indications that the Federal Reserve could pause the cycle of rate hikes after two hikes of 50 basis points each in June and July, amid the worsening economic outlook, coupled with the boost in risk appetite, they continued to weigh on the US dollar, which is a safe haven. In addition, the Reserve Bank of New Zealand’s bet on even higher rates going forward benefited the risk-sensitive kiwi.
Technically, the recent recovery from last year’s low has occurred along an ascending channel. This points to a well-established short-term uptrend and supports prospects for further gains. Follow-up buying beyond the aforementioned 0.6525-30 confluence barrier will reaffirm the positive short-term outlook for the NZD/USD pair.
Bullish traders could then push the NZD/USD pair past the 0.6600 round figure mark, towards the 50% Fibonacci resistance level near the 0.6625 region. The momentum could further extend towards the next relevant hurdle near the 0.6655 area, or the 50-day SMA, price could aim to challenge the all-important 200-day SMA, currently around 0.6700.
On the other hand, any significant pullback below the 0.6500 psychological mark seems to find good support near the lower end of the ascending channel, around the 0.6470-0.6465 region. This is followed by the 236% Fibonacci level just before 0.6400, which if broken will negate the positive bias and trigger aggressive selling around the NZD/USD pair.
4 hour chart
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Technical levels
Source: Fx Street
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