Despite defying the odds and pushing back into the multi-year channel support last week, lingering bearish presence is still felt. The W/W gain of more than 300 pips failed to break Channel Top, not to mention failing to break 0.81 resistance and overcome the swing highs back in July. This failure to push higher resulted in a bearish start for this week, with Channel Bottom opening up as the first bearish target at least where Weekly Chart is concerned. This is reminiscent of the decline seen 2 weeks ago – the end result of price not able to break 0.81 back then. Stochastic readings are in line with a move back towards Channel Bottom with readings crossing Stoch line, forming a peak despite not hitting Overbought region. Generally, a stoch peak formed without first hitting Overbought tended not to provide strong signals, but given that previous Stoch peaks did not hit Overbought similarly, we have precedence for strong bearish trends to emerge nevertheless.
Short-term charts show price pushing marginally higher during early Asian hours, but we were unable to overcome last Friday’s High, and currently we are on the verge of breaking the soft support of 0.8025. Should bears breach that level, 0.80 opens up to be the 1st obvious bearish target. Further bearish objectives can be reasonably expected should price break the 0.795 to 0.7985, but price should ideally break 0.79 before current short-term bull trend can be invalidated.
Fundamentally, last week would have been a good week for bears to continue selling due to Chinese’s milk-powder ban and the surprise increase in unemployment rate. However, prices managed to shrug off the 2 incidents and rallied, suggesting that underlying bulls are extremely strong. Without any strong fundamental news coming out this week, technical bears will need to dug in deep in order to negate all the strong bullish sentiment surrounding NZD right now. Hence, the break of 0.79 to alleviate bullish pressure becomes all the more important this week.