TECHNICAL ANALYSIS
On the daily chart, we can observe the NZD/USD pair breaking below its previous low, a move triggered by disappointing New Zealand CPI data and strong U.S. economic indicators. Despite this bearish momentum, it appears relatively mild, with the overall bias favoring a downward trajectory. Notably, the recent drop seems to have extended beyond the 8-day moving average, depicted in blue. In situations like this, it's common to witness a retracement towards the moving average or a consolidation phase before the next major move. Shifting our attention to the 4-hour chart, we encounter a significant resistance level at approximately 0.5860. At this level, several critical factors converge, including a clearly defined trendline, the 38.2% Fibonacci retracement level, and the 21-day moving average marked in red. This area is expected to draw the attention of sellers, who may choose to set defined risk stop-loss orders just above the trendline to manage their exposure. Conversely, buyers are likely to monitor this zone closely, as a breakout above this resistance level could invalidate the prevailing bearish setup and potentially target an upward rally toward the 0.60 handle. On the 1-hour chart, we can more precisely identify key levels that require close monitoring. In terms of risk management, sellers may find the optimal entry point to be around the resistance level at 0.5860. For those entering the market later, a cautious approach may involve waiting for the price to breach the recent low before participating in the bearish trend, although this approach might yield a less favorable risk-to-reward ratio. Buyers, conversely, should exercise patience, considering long positions after a confirmed breakout above the trendline. rislk-to-reward ratio if the price retraces back to the former support, now turned resistance, where the trendline and the red 21 moving average intersect. Buyers, conversely, would need to see the price break above the trendline and the resistance to negate the bearish scenario and start focusing on the 1.2220 resistance level.
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