- NZD/USD witnessed some heavy selling on Tuesday and nosedived to three-month lows.
- Oversold conditions on hourly warrant some caution before placing fresh bearish bets.
- The pair still seems vulnerable to slide further towards challenging the 0.7000 mark.
The NZD/USD pair continued losing ground through the early part of the European session and plunged to three-month lows, around the 0.7055 region in the last hour.
Sustained weakness below 100-day SMA was seen as a key trigger for bearish traders. A subsequent breakthrough the 0.7100 horizontal support, which coincided with the 38.2% Fibonacci level of the 0.6511-0.7466 strong positive move further prompted some aggressive technical selling and might have already set the stage for additional weakness.
The negative outlook is reinforced by the fact that technical indicators on the daily chart are holding deep in the bearish territory and are still far from being in the oversold zone. Hence, some follow-through downfall towards intermediate support near the 0.7030 region, en-route the key 0.7000 psychological mark, looks a distinct possibility.
That said, oscillators on hourly charts are already flashing extremely overstretched conditions and warrant some near-term consolidation or a modest bounce before the next leg up. That said, any attempted recovery will now be seen as a selling opportunity and runs the risk of fizzling out rather quickly near the 0.7100 confluence support breakpoint.
However, some follow-through buying might trigger a short-covering move and push the NZD/USD pair back towards the 0.7165-70 supply zone. Only a sustained strength beyond the mentioned barrier will negate the bearish bias and pave the way for some near-term appreciating move.
NZD/USD daily chart
Technical levels to watch
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