After selling for 3 consecutive trading days, NZD/USD bears are now facing uncertainty after a myriad of selling/buying activities which culminated to the current Spinning Top. Spinning tops and Dragonfly Dojis are good indications of bulls and bears reaching an impasse with regards to which direction to go. Given such impasse, advantage tend to favor the counter-trend – in this case bulls – as it suggest that bulls have garnered enough strength to block off further advances of bears, but certainly not strong enough to make further bullish headway themselves. However, the reverse argument is sound as well – bears managed to rebuff bullish efforts, suggesting that incumbent bearish pressure is still strong. This seemingly logical yet opposite views make such candlesticks highly unpredictable, yet if either assertions are true, price will likely start reversing significantly or trade strongly in the direction of trend once again.
Hence it is imperative that traders find confirmations following such potential key turning points (reversal or inflection), especially since price is currently sitting on 0.828 significant level, where a break will open up the 0.818 – 0.828 consolidation zone while a rebound from here will bring back 0.838 and potentially 0.842 (Ichimoku Senkou Span B).
Stochastic readings is leaning marginally towards the bull side, with readings dipping its toe into the Oversold region. Though Stoch line is still pointing lower, it is converging towards the Signal Line, suggesting that a trough may occur soon, hinting at a bull cycle from here out. Current reading levels are also similar to troughs seen back in April and March, adding credence to the scenario.
Short-term chart also favor bulls, with price trading back within the consolidation zone found on Monday. However, stoch readings are quickly approaching Overbought region and it is likely that readings will signal Overbought when price hits around 0.832. This would put further bullish advancement in doubt, especially since bulls will need to clear 0.837 to alleviate the bearish pressure since 9th May decline.
From a fundamental perspective, it is important to note that price managed to decline during European and American trading sessions despite growing house sales in New Zealand. A good chunk of current decline can be attributed to potential rate cuts threatened by RBNZ Gov Wheeler, who stated that rate cuts will occur as soon as housing market start to stabilize. Rising home sales figure with house prices index put a large dent in Wheeler’s threat, which explained Monday’s rally during Asian hours. The move lower during European and American timezones suggest that bears are still strong, which will continue to add pressure against any upside moves.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.