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NZD/USD undergoes corrective process

An upward and over extended market, set against the backdrop of a downtrend may swing the NZD/USD buyer-seller pendulum back towards the bears again.

NZD/USD was in sell mode until a recent move changed the shape of the price structure. The 4hr RSI was on average printing below 50% over the last three weeks and recently broke above the 60% mark. This can be considered overbought territory in the context of a full-fledged bear market. Therefore, the present corrective rally is vulnerable for a turnaround from here.

Further, the 50SMA is still below the 200SMA on 4hr charts. However, should the pair extend its recovery from multi-week lows into a new trend, traders may require a contingency plan in place.

FOMC: commodity and risk currencies at risk - SG

Analysts at Societe Generale explained that if market pricing reflects different degrees of conviction about the likelihood of a rate hike, then a move is likely to cause risk aversion as the front end of the US yield curve re-prices. But longer-dated US yields may not rise much if at all.
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