The NZDUSD has extended its rally as visible in this D1 chart. This extension was fueled primarily by the US debt ceiling debate as well as government shutdown which has further pressured the USD. This currency pair has now formed two bearish chart patterns; a rising wedge formation as well as a double top formation. We expect the NZDUSD to correct as soon as this week which should lead to a breakdown of it ascending support level and this currency pair could drop down to its 200 DMA.
MACD has not confirmed the extension of the rally and formed a negative divergence which is a bearish signal. The histogram as well as moving average are on a downward trajectory. RSI has formed a negative divergence as well and is trading in overbought territory. A breakdown from this condition should further fuel the correction.
We recommend a short position at 0.8400. This would be an addition to our previous short position which we took on September 12th at 0.8150. We also recommend a stop buy order at 0.8500 in order to hedge our short positions.
Traders who wish to exit this trade at a loss are advised to place their stop loss order at 0.8500. We will not use a stop loss order and execute this trade as recommended. Place your take profit order at 0.8200.
Here are the reasons why we call the NZDUSD currency pair lower
- The NZDUSD currency pair has now formed to bearish chart patterns; a rising wedge formation as well as a double top formation
- MACD does not confirm the rally and formed a negative divergence which is a bearish signal
- RSI is trading in overbought territory and formed a negative divergence as well
- Profit taking in order to realize trading profits
- New short positions by institutional swing trader
- Short-term USD relieve rally