The New Zealand dollar is holding firm against the US dollar as the pair sits above the 0.7100 resistance level and continues to impressively cling on to its early-month price gains.
Trades appear to be waiting for the next decisive move in the NZDUSD pair as the recent upside momentum has stalled somewhat, despite bulls seriously defending the 0.7100 level.
Buying a strong price dip could be the top strategy with the NZDUSD pair at this juncture, with a pullback towards the 0.7000 to 0.6950 price area the primary spot to look to pick-up the kiwi at bargain level.
From a technical perspective, the NZDUSD pair is testing towards the top of a huge falling wedge pattern around the 0.7140 level and has thus far failed to stage a breakout. Again, this could be hinting at a lower before higher scenario playing out
I would suggest keeping a close eye on risk-off sentiment this week. US indices do look ripe for a pullback, with the NZDUSD pair being extremely risk-off sentiment, this would likely cause a strong price pullback.
Traders are currently betting that the move in the NZDUSD pair is going to reverse sharply according to ActivTrader market sentiment tool, which shows that a large sentiment bias has built.
According to the ActivTrader market sentiment tool some 86 percent of traders are bearish towards the NZDUSD pair. The short squeeze has been quite brutal recently, it may be time to look for a reversal.
NZDUSD Short-Term Technical Analysis
The four-hour time frame continues to show that the NZDUSD pair has formed huge amounts of negative MACD price divergence during its recent price ramp towards the 0.7140 area.
According to the overall size of the bearish MACD a reversal down towards the 0.6940 area could take place at anytime in order for the divergence to be fully reversed. As mentioned earlier, this could be a reason to be cautious towards a large price pullback.
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NZDUSD Medium-Term Technical Analysis
The daily time frame shows that the NZDUSD has reached the top of a large falling wedge pattern, which are typically known to be amongst the most powerful breakout patterns.
If bulls continue to fail at following through, and breaking through the top of pattern, then a reversal towards the mid-point of the pattern, around the 0.6900 level, is highly probable.
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