NZD/USD is Strongly Supported by Buyers as the Price Continues to Break the Resistance Level

NZD/USD is Strongly Supported by Buyers as the Price Continues to Break the Resistance Level

Published: September 4th, 2020

Weekly chart

NZD/USD Weekly Technical Analysis 4 Sep 2020

The Weekly chart will certainly help to get a big picture of the NZD/USD price action. Fibonacci applied to the previous correction to the upside, which occurred between 2016 - 2018, shows important support and resistance levels. The most important was the 78.6% Fibonacci retracement level at 0.6488, which was rejected cleanly along with the downtrend trendline, which was acting as the support after it got broken.

Since NZD/USD bounced off the 0.6488 support it went up and broke yet another resistance, this time it was 61.8% Fibs at 0.6716. Prior to the breakout, it was a strong supply level which eventually was broken, together with the 200 Exponential Moving Average. This certainly shows the strength of the NZD/USD in the long run, strongly suggesting the continuation of an uptrend.

Based on the same Fibonacci retracement indicator, the next resistance is located at 0.6877, which is 50% Fibs, corresponding with yet another downtrend trendline. This means that there is at least 150 pips upside potential, before/if strong downside correction will take place. But the uptrend might also continue if the 50% Fib resistance will be broken. In this case, NZD/USD can be expected to rise further, to test 38.2% Fibs at 0.7038.

Daily chart

NZD/USD Daily Technical Analysis 4 Sep 2020

In August there was a clear rejection of two Fibonacci indicators, both levels are 78.6% near 0.6488. The first Fibs is as per the Weekly chart, and the second Fibs was applied to the last downside wave, where NZD/USD bottomed out at 0.5469. At the same time, 50 Exponential Moving Average was rejected, after which price broke above the 0.6716 resistance and the average-price uptrend trendline.

Right now price pulled back slightly and cleanly rejected 0.6667, which is 78.6% Fibs applied to the correctional move down where price bounced off the EMA. Therefore, the support area can be located between 0.6667 and 0.6716, where currently NZD/USD is trading. Most likely this will remain a strong demand zone as long as the Daily closing price remains above the 0.6667 support.

16-Hour chart

NZD/USD 16-Hour Technical Analysis 4 Sep 2020

On the 16-hour chart, the price has reached the bottom of the ascending channel and rejected the 78.6% Fibs, while remaining above the 200 EMA. Higher highs and higher lows are being printed, support levels are being rejected and resistance levels are being broken. Considering the recent bounce off the 0.6667 support, the uptrend continuation is already in place and price should be expected to test 0.6877 within a week or two. This is because the upside resistance is crossing the average price uptrend trendline on September 15, which is two weeks away from the current date.

4-Hour chart

NZD/USD 4-Hour Technical Analysis 4 Sep 2020

On the 4-hour chart, the price broke above the downtrend trendline, 50 EMA, and 78.6% Fibonacci resistance level. The current correction seems to have ended, although there might be a consolidation phase in order to test the bottom of the ascending channel.

Therefore, a potential double bottom near 0.6667 level is possible, and even spikes below can be expected. Although for the uptrend continuation it will be extremely important that the daily close will remain above the 0.6667 support level. If the price breaks below, the bullish outlook will be invalidated and the downtrend can take place, potentially resulting in the price decline towards the 0.6488 support level.

But, as long as daily close remains above the support, 150 pip rise will be imminent. Besides, on this chart, the upside target is confirmed by two Fibs. First is the 50% retracement level as per the Weekly chart, and the second is the 727.2% Fibs applied to the corrective wave down after the breakout of the 50 EMA.

1-Hour chart

NZD/USD 1-Hour Technical Analysis 4 Sep 2020

Right now, NZD/USD is facing a minor resistance at 0.6732. This is the level where the downtrend trendline was rejected alone with the 200 EMA. It might suggest the beginning of a short-term consolidation phase, where the price will be stuck between the 0.6667 support and 0.6732 resistance for a couple of days.

The breakout could be in either direction, which makes it important to wait and see the outcome. Break and close above the resistance should invite more buyers, thus pushing price up. But the break and close below the support could start pushing price down, potentially resulting in the beginning of a downtrend. There could be spikes produced below the 0.6667, potentially testing the previous level of resistance at 0.6647. But, as has been mentioned, the uptrend will remain valid as long as the daily close is above 0.6667

Summary

NZD/CAD trend is strongly bullish in the long term. However, on smaller timeframes, it seems like consolidation is about to take place. Buyers and sellers are likely to wait for the breakout of the rage zone, before taking action. Regardless, based on the multiple timeframe price action, the probability is strongly in favor of an uptrend.

Upside targets

As per the weekly and 4-hour chart, key resistance is located at 0.6877 and confirmed by two Fibonacci retracement levels. This is over 150 pips growth potential which is expected to occur within two weeks

Probability of a downtrend

The downtrend can only become valid upon the daily break and close below the 0.6667 support, which will completely invalidate the bullish forecast. However, spikes below this support level can be expected.

Support: 0.6667, 0.6647

Resistance: 0.6732, 0.6877

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