By: Mike Kulej
The New Zealand Dollar has been one of the strongest currencies this year. While the NZD did not make new all time highs against the US Dollar, like the AUD, it reached the highest level in 30 months at 0.7975.
Over the last two weeks, however, the NZD-USD slipped, touching 0.7576 on Tuesday. A 400 pips move is a large price swing for this currency pair, prompting speculations about a reversal under way. Perhaps that is true, but on based on principles of technical analysis, what we have seen so far is only a correction, at least for now.
On the daily chart, the NZD-USD is still above the main trendline, as well as the recent low from late October at 0.7405. Breaking through either one of these supports, or both, would make much stronger case for a full-blown reversal. Other technical indicators also do not confirm the reversal for the moment.
The MACD is falling, but remains above the zero line. In addition, there was divergence between the indicator and the price. While it is not necessary to have a divergence at the start of a reversal, presence of one increases the probabilities for a successful trend change. For now, the NZD-USD is in a correction within the main uptrend, subject to change if it falls under 0.7400 level.