The NZDUSD has experienced a sharp decline after reaching its 2024 high of 0.63775. A key reversal was signaled by the formation of a Shooting Star pattern, which marked the end of bullish momentum and initiated a strong bearish move. This shift was further validated by long bearish candlesticks and additional technical indicators pointing to increased selling pressure.
As the pair continues to trend downward, the technical picture reveals key resistance and support levels that traders should watch. Alongside these technical insights, fundamental factors such as the Reserve Bank of New Zealand’s recent rate cuts play a crucial role in shaping the pair’s outlook, with market sentiment leaning towards further depreciation of the New Zealand dollar.
High Impact Economic Events
Wednesday 04:00 am (GMT+3) – New Zealand: Official Cash Rate (NZD)
Thursday 15:30 (GMT+3) – USA: CPI m/m (USD)
Friday 09:00 am (GMT+3) – UK: GDP m/m (GBP)
Friday 15:30 (GMT+3) – Canada: Employment Change (CAD)
Friday 15:30 (GMT+3) – USA: PPI (USD)
Chart Analysis
After reaching 0.63775, its highest level in 2024, the NZDUSD has since followed a sharp downward trajectory. A Shooting Star reversal pattern signaled the exhaustion of bullish momentum, marking a key turning point. The bearish reversal was further confirmed by the emergence of long bearish candlesticks, reinforcing the downtrend and highlighting growing selling pressure in the market.
From a technical perspective, the pair has slipped below both the 20-period and 50-period Exponential Moving Averages (EMAs), while the Momentum oscillator has crossed under the 100-line, and the Relative Strength Index (RSI) has dropped below 50. These indicators suggest growing bearish pressure. However, the 20-period EMA has yet to cross below the 50-period EMA.
Key Resistance Levels
Should the buyers take market control, traders may direct their attention toward the four potential resistance levels below:
0.61051: The initial resistance is set at 0.61051, corresponding to the swing low marked on September 11.
0.62256: The second price target is identified at 0.62256, aligning with the weekly Pivot Point estimated using the standard methodology.
0.62976: The third price objective is projected at 0.62976, corresponding to the peak formed on August 29.
0.63775: An additional price target is seen at 0.63775, representing the highest exchange rate in 2024.
Key Support Levels
Should the sellers maintain market control, traders may consider the four potential support levels listed below:
0.60736: The initial support level is identified at 0.60736, representing the weekly support (S1) estimated using the standard Pivot Points methodology.
0.59924: The second support level is established at 0.59924, reflecting the weekly support (S2) estimated using the standard Pivot Points methodology.
0.59368: The third support level is seen at 0.59368, corresponding to the 161.8% Fibonacci Extension drawn from the swing low of 0.61051 to the swing high of 0.63775.
0.58488: An additional downside target is noted at 0.58488, corresponding to a daily low from August 5.
Fundamentals
New Zealand’s Reserve Bank accelerated its rate-cutting efforts, lowering the Official Cash Rate by 50 basis points to 4.75% amid concerns over a weakening economy. This move, following a 25 basis-point cut in August, was largely expected by economists. The central bank noted that future rate changes will depend on evolving economic conditions. The decision comes as New Zealand faces rising unemployment, falling house prices, and slowing inflation. Economists predict further rate cuts, with markets anticipating another 50 basis-point reduction in November. The New Zealand dollar dropped following the announcement.
Conclusion
In conclusion, the NZDUSD is facing strong downward pressure, both from technical and fundamental perspectives. The formation of bearish patterns and key technical indicators suggest the potential for further declines. On the fundamental side, the Reserve Bank of New Zealand’s aggressive rate cuts, in response to a weakening economy, have added to the bearish sentiment surrounding the New Zealand dollar, with further cuts likely to influence the pair’s trajectory in the coming months. Traders should stay alert to both technical signals and upcoming economic events that could impact market direction.