- NZD/USD is testing the POC in a sell-off that has gathered pace over the last 24 hours.
- The DXY is now at a level where a correction might be expected to the 93.60s, giving rise to a short-term upside bias.
The moves in the FX space has been driven by US dollar fundamentals and a shift in central bank and investor optimism.
Technically, this makes for a series of confluence across the dollar bloc.
Starting with the DXY, we can see that the index has completed a technical breakout in a typical 3 wave pattern as follows on the daily chart:
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If the above scenario plays out, then there is room for an upside correction in the dollar bloc currencies ahead of the next bearish impulse to the downside.
Long above, short below the POC
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The Point of Control, (POC), is lined up with the current market.
The POC offers a bullish scenario while above it towards a test of prior structure and bearish below it to complete the formation of a monthly reverse head and shoulders.
If the US dollar does indeed stall at this juncture and give background, the above scenario has a high probability of playing out.
Monthly reverse head and shoulders
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From a monthly perspective, the formation of a reverse head and shoulders is an overall bullish scenario of the pair and rhymes with the volume point of control located towards the 0.73 area on a longer-term basis.
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