- NZD/USD confirmed a bearish break below a head and shoulders neckline support.
- Bears might now aim to test the 0.7040 support ahead of the 0.7000 round-figure.
- A sustained move beyond the 0.7235 region is needed to negate the bearish bias.
The NZD/USD pair added to last week’s heavy losses and witnessed some follow-through selling for the second consecutive session on Monday. The momentum dragged the pair to three-week lows, around the 0.7110 region during the early European session.
From a technical perspective, the NZD/USD pair confirmed a bearish breakdown through the head and shoulders neckline support on Friday. The subsequent fall has already set the stage for an extension of the ongoing corrective slide from multi-year tops.
The negative outlook is further reinforced by the fact that oscillators on the daily chart have just started drifting into the bearish territory. Hence, a subsequent fall below the 0.7100 mark, towards testing the 0.7040 support, looks a distinct possibility.
The downward trajectory could further get extended towards the key 0.7000 psychological mark, which represents the bearish pattern target. This, in turn, should act as a key pivotal point for traders and help determine the NZD/USD pair’s near-term trajectory.
On the flip side, the pattern support breakpoint, around the 0.7145-50 region should keep a lid on any attempted recovery move. This is closely followed by the 0.7170-75 resistance, which if cleared decisively might trigger a short-covering move.
However, any subsequent move beyond the 0.7200 mark might still be seen as an opportunity for bearish traders and remain capped near the 0.7235 supply zone. Only a convincing breakthrough the mentioned barrier will negate the near-term bearish bias.
NZD/USD 4-hourly chart
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Technical levels to watch
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