After encroaching into Bulls territory last Friday, bears retreated slightly during US session, suggesting that Bulls are indeed strong below 0.78 round figure. However prices continue to trade below the 0.782 support turned resistance that was in play between 22nd to 23rd August.
Stochastic readings suggest that a bearish cycle may be in play now with stoch readings pushing lower. However it should be noted that readings did not really entered into the Overbought region, and as such this would constitute a weak bearish signal. Hence, readings should preferably break below 60.0, where peaks have been seen last week in order to affirm that a bearish cycle is truly underway. If not, the possibility of Stoch readings turning around and pushing back into the Overbought region for a stronger bearish signal eventually remains.
From a pure price action perspective, price should also ideally break below Friday’s low of 0.776 in order to open up the possibility of a move back towards the descending Channel Top. From there on, if bearish momentum continue to remain strong, we could see price breaking into the descending Channel and accelerate lower, or perhaps straddle Channel Top to trade lower slowly.
Weekly Chart continues to show signs of bullishness. Stochastic readings remains bullish with readings pointing higher, while current price level suggest that we are right back within the Support Channel. If past trends are of any guidance, we could see bulls sending price aggressively up towards Channel Top once again. Given that we’ve seen such price behavior for a large part of past 2-3 months, it is conceivable that we may need to wait for around the same period of time before the confluence of 0.81 and Rising Channel Top can be broken for a move towards 0.85 and beyond.
Fundamentally, it is interesting to see that a weaker much weaker than expected Trade Balance for New Zealand which was released this morning did not result in any bearish move for the Kiwi Dollar. This suggest that bulls are more aggressive than what fundamentals are throwing at it – a good sign that price may indeed rally back up towards Channel Top once again.
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