Potential signal:
- I am selling below the 0.5750 level, with a stop of 0.5820, and a target of 0.5680.
- The New Zealand dollar stalled near 0.58 as key moving averages compressed price action.
- With the US dollar firming and risk appetite weak, downside targets remain in focus unless resistance breaks convincingly.
The New Zealand dollar initially tried to rally during the trading session on Wednesday, but as you can see, we continue to hesitate near the 0.58 level. This is an area that is also backed up by the 200-day EMA. So, it is possible that we will see this market continue with a lot of noise in this area. After all, the 200-day EMA is a long-term indicator that a lot of people pay attention to, and we happen to be at an area in the form of the 0.58 level that has been important a couple of times in the past.
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Key Moving Averages and Market Structure
Further compressing and confounding traders' directionality is the 50-day EMA, which sits underneath. We have seen the so-called death cross in effect since the end of September, and it is still a thing at this point, but it is worth noting that the 50-day EMA is at least trying to turn higher.
Nonetheless, the US dollar has been fighting back for the last couple of days at least against several other currencies as well. But Wednesday was a little different in the sense that we really started to see pushback against some of the other majors.
With that being the case, I think we may have more downward trajectory ahead of us because, quite frankly, the New Zealand dollar is a little further out on the risk spectrum than I think a lot of people are willing to be involved in right now. If we break down below the 50-day EMA, the 0.57 level could be the next target. After that, we could be talking about 0.56.
All of that being said, if we were to turn around and break above 0.5850, then we could see this market go looking to the 0.60 level given enough time. As things stand right now, though, it just looks like a mess. It also looks like a market that might be a little overextended and starting to roll over.
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