Looking For A Long-Term Sell Signal As the Trend Might Be Shifting in NZD/USD

Like all major currencies, the NZD has been climbing strongly against the US Dollar for quite some time, especially over the last two weeks. This may now be changing for the pair, as we are already approximately 80 pips lower from the top, meaning that the reverse may have started.

The Techncials 

As you can see from the weekly chart, NZD/USD reached the 200 SMA (purple) yesterday, and reversed just below it. This moving average currently comes in at 0.7440, which is just a few pips above yesterday’s swing high.

The 200 SMA had provided resistance in July of 2017, albeit 50 pips higher, as that’s where this moving average was back then. It looks like it is playing that role again now, as we bounced off of it yesterday evening.

Yet another bearish signal is the resistance line. The area around 0.7440 topped the climb in September, becoming resistance level in itself.

The stochastic indicator is severely overbought currently, and this Forex pair has returned lower every time the stochastic indicator has been overbought.

The 200 SMA rejected the price once again.

The Fundamentals 

The strongest bearish signal is fundamental. Last night, the inflation in New Zealand took a massive turn down. The CPI (consumer price index) report was expected at 0.4%, while last month’s number was 0.5%.

The CPI report dived to just 0.1%, scaring the NZD buyers away, and NZD/USD lost more than 100 pips immediately after the release. Now, the fundamental picture has become bearish for the NZD, and the technical picture is becoming bearish as well.

We need to take the USD  into account when considering this forex pair. The USD is still in a bad place at the moment, so I will be on the lookout  for shorts in this pair once the situation improves.