Will the NZD/USD Uptrend Continue or Will the Downside Correction Take Place?

Will the NZD/USD Uptrend Continue or Will the Downside Correction Take Place?

Weekly chart

NZD/USD Weekly Technical Analysis 28 Dec 2020

NZD/USD has established a string uptrend since May when the price bottomed out at 0.5469. Up until this month, the price has recovered by 31%, which equals 1700 pips. This was truly a very fast and strong recovery by NZD/USD, although it could have come to an end. This is because after the price broke above the uptrend trendline it has reached and cleanly rejected the 23.6% Fibs at 0.7171. The 50% Fibs was applied to the downtrend trendline breakout point, in order to see the final upside target at 0.7697. But as can be seen, 23.6% of Fibs was rejected prior to that.

This might imply the end of the uptrend or the end of the current wave, in which case NZD/USD will either initiate a downside correction or even a trend reversal. In any case, the downside move can be expected as long as the price remains below the 0.7171 resistance.

Daily chart

NZD/USD Daily Technical Analysis 28 Dec 2020

The average-price has been applied through the resistance and the support levels formed between March - July. It shows that during the past few weeks NZD/USD has been consistently trading below the trendline, which is obviously acting as the resistance. It can also be seen taht price is struggling to produce strong bullish candles, although still rising which potentially being under some selling pressure.

This week the selling pressure is likely to increase, and overall, the price might decline towards the strong support area located near 0.6840. This support is confirmed by two Fibonacci retracement levels, the first being the 38.2% Fibs as per the weekly chart, and the second is 50% Fibs applied to the last upside wave.

16-Hour chart

NZD/USD 16-Hour Technical Analysis 28 Dec 2020

On the 16-hour chart, the RSI oscillator has formed a bearish divergence, suggesting a corrective downside move. Based on the Fibonacci retracement levels there are two key support areas to monitor. The nearest one is 0.6920, which corresponds to 38.2% and 161.8% Fibonacci retracement levels. The second support is located at 0.6841, which corresponds to 50% Fibs as well as the bottom of the ascending channel and 200 Exponential Moving Average.

4-Hour chart

NZD/USD 4-Hour Technical Analysis 28 Dec 2020

While the correction holds a high probability, the uptrend continuation might also take place. This is because there was support formed at 0.7083, which has been rejected along with the 50 Exponential Moving Average. Therefore, a pullback to the upside is likely to be the case. NZD/USD might move up, to re0test the uptrend trendline and/or one of the Fibonacci resistance levels. The nearest resistance, which already got rejected is the 78.6% Fibs at 0.7135. The second and probably the most important resistance is at 0.7152, which is 88.6% Fibs. When/if any of these resistance indicators will get rejected and the 0.7083 support will be broken, downside pressure will be confirmed. Up until this point, NZD/USD should be expected to consolidate between 0.7171 resistance and 0.7083 support.

1-Hour chart

NZD/USD 1-Hour Technical Analysis 28 Dec 2020

It seems like on the hourly chart, the price is forming an ABC upside correction after it broke above the downtrend trendline. Clearly, the support area is now located near 0.7085 as it got rejected multiple times. On the other hand, the resistance is located at 0.7144, which is confirmed by 23.6% Fibs as can be seen on the chart. Perhaps the final upside move for NZD/USD might result in a price increase towards the 0.7144 area, before/if the downside correction will take place. But most importantly, NZD/USD must break below the 0.7085 support area as well as the uptrend trendline.

Summary

NZD/USD has reached and cleanly rejected the Fibonacci resistance while the RSI oscillator formed a bearish divergence. It shows, that probability might be shifting in favor of a downside move as long as the recently printed high at 0.7171 is being respected.

Downside targets

As per the 4-hour chart, there are 3 major support areas that might play an important role in further price development. The nearest and the most obvious is the 0.7000 psychological support. Then goes the 0.6920 support confirmed by 3 different Fibonacci retracement levels. Anf finally is the 50% Fibs at 0.6842.

Probability of an uptrend

A break above the 0.7171, which is the recently produce high, will invalidate the bearish scenario. In this case, the long-term uptrend can be expected to continue, potentially towards the 0.7200 or 0.7300 psychological resistance.

Support: 0.7084, 0.7000, 0.6920, 0.6840

Resistance: 0.7135, 0.7152, 0.7171

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