Bearish outlook for NZDUSD

IN March 2021, NZDUSD rebounded from a support level established in December 2018 and has since consolidated in a horizontal channel that spanned for three months. At the time of analysis, the pair had just broken down from the lower band of the horizontal channel. In the medium term, we hold the view that the price is bearish as signalled by chart patterns as well as technical indicators. However, in the shorter term, there is a possibility of a price rebound to retest the channel support line, which has now turned resistance.

First and foremost, the formation of a double top pattern could be observed within the horizontal channel. The pattern is identified when the pair was rejected twice upon hitting levels around 0.7300, forming long red candles after each attempt. At the time of analysis, the pair had just completed the double top pattern and broken down from the channel. This would mean a deeper pull-back is imminent as failing to break through the resistance level after two attempts is seen as a bearish sign. Additionally, the repeated occurrences of bearish engulfing candles in the past month shows sign that the selling pressure is strong and lower prices may come.

Secondly, NZDUSD's bearish outlook for the medium term is also supported by the MACD indicator. The MACD histogram is the distance between the MACD and its signal line. If the MACD is below the signal line, the histogram will be in the negative region. Currently, the MACD histogram is negative and that suggests the momentum is bearish for the pair. The bearish outlook would be invalidated if the MACD histogram stages a reversal to the positive region.