NZD/USD – Is a Correction on the Cards? (Video)

NZDUSD
The NZDUSD and AUDUSD have been very active currency pairs drawing the focus of lots of currency traders recently. There is a lot going on in the technical picture. Craig Erlam, Senior Market Analyst for Oanda highlights the downward channel as the key indicator to recognise. When you such a strong downward trend you are looking for the price action to make new lows. But ultimately if you see the drop off that we have seen in the technical picture since August; you must keep an eye on the momentum indicators. When is momentum going to run out?

The downtrend in the NZDUSD is however levelling out. We are seeing a divergence between the price and the moving averages. We have a slow down of the trend making a new higher low. That would suggest that we may be entering a correction move. If we do see a bounce then the most notable level will be 0.70. A strong round number. Craig expects a larger correction; but the 0.70 level is the initial test.

USDCAD
Moving over to North America we look at USDCAD. This pair is volatile and strongly effected by data releases. Strong risk appetite needed for this pair. The technical picture shows that the pair has been sideways bound since the start of November. Trading range between 1.2925 and 1.27. Resistance around the 50 fib has been key, capping any moves to the upside. While previous support and has capped any moves to the downside.

This chart is looking bearish. Admittedly if it broke above the 50 fib, it would be a strong Bullish signal. But it has stumbled around this level quite a lot and takes away from the bullish technical indicators. Below the 200SMA / 233SMA, double top formation since the start of November. This suggests that we could lower down to 1.2450.

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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.

Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.