NZD : Sell Signal

(Thu, 10 Dec 2020). NZD/USDpulls back from a fresh weekly high (0.7095) as the US Dollar bounces back of waning investor confidence, and the Relative Strength Index (RSI) warns of a further decline in the exchange rate as the indicator slips below 70 to offer a textbook sell signal.

NZD/USD RATE APPROACHES MONTHLY LOW AS RSI SELL SIGNAL EMERGES

NZD/USD approaches the monthly low (0.7006) as the RSI falls back from overbought territory, and the correction from the yearly high (0.7104) may gather pace as the US Dollar continues to reflect an inverse relationship with investor confidence.

Swings in risk appetite may continue to sway NZD/USD as the Federal Reserve appears to be on track to deliver a dovish forward guidance at its next interest rate decision on December 16, and it seems as though the central bank will rely on its current tools to support the US economy as “participants judged that it would be appropriate over coming months for the Federal Reserve to increase its holdings of Treasury securities and agency MBS at least at the current pace.”

It remains to be seen if the Federal Open Market Committee (FOMC) will adjust the monetary policy outlook ahead 2021 as Chairman Jerome Powell and Co. “assess how our ongoing asset purchases can best support our maximum employment and price-stability objectives as well as market functioning and financial stability,” but the break above the June 2018 high (0.7060) suggests that the recent weakness in NZD/USD could end up being an exhaustion in the bullish trend rather than a change in market behavior as key market trends look poised to persist in the year ahead.

The decline in net-long position comes as NZD/USD approaches the monthly low (0.7006), while the minor shift in net-short interest has done little to alleviate the tilt in retail sentiment as 26.65% of traders were net-long the pair earlier this week.

With that said, the recent weakness in NZD/USD could end up being an exhaustion in the bullish trend rather than a change in market behavior as key market trends look poised to persist, but the Relative Strength Index (RSI) warns of a larger pullback in the exchange rate as the indicator slips below 70 to offer a textbook sell signal.

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