After a depressing Monday Asian morning, prices recovered during early US market hours which saw price bouncing higher from the confluence of Channel Bottom and Ichimoku Senkou Span B, which is incidentally the ceiling of 17th and 19th July. Prices were further aided by a weakening USD and buoyancy from , pushing towards 0.80 but faltered at around 0.7975 during US midday. Bullish momentum took over quickly during early Asian session today, pushing towards 0.80 once more with no significant pullbacks. The end result is a series of 7 bullish hourly candles with price touching 0.80 for the first time since 20th June.
From a technical perspective, prices is now heading into the rising Channel Top, which can be relied on to provide some resistance. With Stochastic readings deep within Overbought region, it becomes less likely that price may be able to break the resistance line without any sort of significant pullbacks in between, at the very least, a bear candle is likely to be formed moving forward before the resistance line is broken. This is especially true considering that current rally isn’t fueled by any fundamental reasons, which increases the strength of resistances holding.
Long-term chart shows price approaching the top end of the multi-year Channel Support. However, unlike short-term chart, price action does not appear to be overstretched, and it should not be surprising to see price breaking Channel Top for even greater bullish resolve. Stochastic readings agrees, with readings currently signaling a bullish cycle yet readings are still a good distance away from the Overbought region. Should price does manage to close above the Channel Top, we the three white soldiers pattern will be formed, which may usher in an even stronger bullish acceleration towards early 2013 levels and put the multi-year uptrend on track.
It is interesting to see prices pushing higher before the RBNZ rate decision. Should price close in to Channel Top just before RBNZ decision, we could potentially see RBNZ decision making helping price to break the Channel top or affirm the bearish rejection. Based on New Zealand fundamentals, it is difficult to imagine RBNZ cutting rates on Thursday due to continued inflation risks especially in the housing market. This could be the reason why NZD/USD is heavily bidded right now, as short-traders cover their profitable positions against the inevitable RBNZ non-action. This however, also sets a perfect scenario for a bearish shock if RBNZ does carry out a rate cut this time round.