Bearish Reversing Pattern in NZD/USD at the 100 SMA

Yesterday we saw a sudden surge in NZD/USD due to weak economic numbers from the US for the second day, causing a sell-off in the USD and giving bullish traders hope for further upside potential in this pair. While technical traders may view this as a reversal from mid-term lows, fundamental speculators will focus on the softer data from the US, such as the softening Conference Board Consumer Confidence readings, as well as the ecline in durable goods orders, although capital orders incresed again in January.

The NZD and other risk currencies have been experiencing increased demand this week due to positive Chinese data. The numbers show that business activity in China has risen to levels seen before the COVID-19 pandemic. Specifically, China’s official Manufacturing PMI increased to 52.6 points in February – the highest level since April 2012. Besides that, the non-manufacturing sector numbers also jumped to 56.3 points in last month, which is the highest level since June last year. These positive developments in China have helped to boost demand for the Kiwi and other risk assets.

NZD/USD showed buying momentum in early trading, but its value is still below last week’s highs. Although confident traders may view this as a positive sign for the New Zealand Dollar, caution is advised as there will be more reports that could affect the currency pair in the coming days and weeks. Traders should monitor the 0.62500 level in this pair where the 200 SMA (purple) stands, which is a resistance zone as well.

But, before that we have the 100 SMA (green) on the H4 chart, where the price is trading right now. Buyers pierced this moving average for a short period, but NZD/USD has returned back below it now, while the stochastic indicator is overbought and reversing down. So, it seems like the retrace higher might be over and the main trend is still down, so we decided to take this opportunity and open a sell NZD/USD signal.

NZD/USD Live Chart