Forex trading outlook for NZD/USD applauds the rally but sees it built on weak foundations, with profit taking on DXY a key driver.
NZD/USD appears to have ended its downside movement and now it could climb higher as the DXY has stepped back. The US Dollar Index has slipped lower after its stellar rally at thee end of last week. Indeed the depreciation of the US dollar can be seen as a natural corrective.
Technically, the pair has reached a dynamic support and now it is approaching the weekly pivot point (0.7004).
However, it should be emphasised that the pair has increased because the DXY has fallen and not because the NZD is inherently strong.
NZD forex trading outlook: consumer sentiment data up next
Traders will be waiting to see how the pair reacts after the New Zealand Westpac Consumer Sentiment is released tonight.
On Tuesday (22 June), the US is set to release the Existing Home Sales and the Richmond Manufacturing Index. Also, the US Federal Reserve Jerome Powell is speaking and that could bring more volatility and violent price movements.
And if that wasn’t enough to keep market participants on edge, sentiment could change again on Wednesday when the US publishes the Flash Manufacturing PMI and the Flash Services PMI data.
NZD/USD technical analysis
The pair has found strong support on the descending pitchfork’s lower median line (LML) and now is back above the ascending pitchfork’s lower median line (lml). It approaches the weekly pivot point (0.7004) which is seen as the first upside obstacle.
Also, the median line (ML) could see price action after previously being rejected by the lower median line (LML).
Nevertheless, traders will be aware that NZD/USD could resume its drop if it stays under the median line (ML) and if it falls back below the lower median line (lml).
Technically, this could be only a temporary rebound. In order for a more significant leg higher to take form, it would need to be signalled by a valid breakout above the weekly pivot point and through the median line (ML).
Stabilizing outside of the ascending pitchfork’s body could indicate a larger decline ahead.
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