NZDUSD has been trending lower across most time frames but is showing signs of a large pullback from its latest drop. Price bounced off support at the .6425 area and is retreating to the Fib levels marked on the swing high and low on the 4-hour chart.
At the moment, the pair is testing resistance at the 38.2% Fibonacci retracement level near the .6600 major psychological mark. No reversal candlesticks have formed yet, which suggests that the correction might carry on to the next potential resistance.
An area of interest is located between the 50% and 61.8% Fib levels, which might be enough to keep further gains in check. The 100 SMA just crossed below the 200 SMA to confirm that the downtrend is likely to carry on while stochastic and RSI are nearing the overbought levels.
The main event risks for this setup this week have already passed, as the FOMC minutes and New Zealand quarterly PPI readings have been released. The transcript of the Fed meeting supported the idea of a December liftoff but reiterated that the trajectory of further tightening moves would be gradual.
Meanwhile, the PPI readings from New Zealand printed surprisingly good results, with input prices up by 1.6% and output prices up by 1.3%. Then again these don’t incorporate the latest slump in dairy prices since the middle of October, which might weigh on inflation figures later on.
With that, the path of least resistance for this pair is still to the downside, with the latest rallies likely spurred by profit-taking activity. Risk appetite remains weak, favoring the safe-haven US dollar against the higher-yielding Kiwi.