Wednesday, July 29, 2020

Bearish Divergence On NZDUSD

Marco Tosoni

FХ Strategist & Financial Commentator

After setting a bottom around the half of March right below 0.5500 area, the New Zealand dollar has regained some relative strength, with a strong bullish rally that brought this pair back towards 0.6700 area nearby the resistance zone set in the end of 2019, before the sharp drop scored in the first quarter of the 2020.

During yesterday’s session, anyway, after setting a new weekly top, we had a first bearish correction with the formation of a bearish hanging man and a daily closure around 0.6660 area.

The Average True Range on his hand is still declining and it’s currently working around the 2019 levels so in my opinion this element should anticipate an increase of the activity on this pair over the next few weeks.

Looking at the RSI indicator, we can detect a perfect bearish divergence, that in combination with the strong resistance area around 0.6700 should anticipate a technical correction for the US dollar, at least with a short-term outlook.

The setup would be activated in case of a breakdown of yesterday’s bottom around 0.6620 area. The stop loss must be placed at 0.6720 above the weekly top, while the target price can be expected at 0.6520 around the bottom zone set on this month.

As always I recommend to trade carefully and to plan at best every move. Don’t forget to subscribe to NBHM YouTube Channel to stay up to date with the financial markets! Have a good trading and see you for the next video.

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