Looking through the charts today, NZD/USD jumped out at us. We noticed on Friday that the pair had formed a bearish englufing candle formation on the daily chart. That set off a drop on Monday but the losses were supported when NZD/USD fell to the 200-day moving average at 0.7002. That triggered a turnaround and now we have a bullish hammer formation.
Notice the support from the red 200-day moving average line as well as the big red candle a day earlier. The 100-day moving average (in blue) is also shown.
Overall, NZD/USD looks to be setting up for a big move. The market is locked between the 100-day and 200-day and when it breaks out it will likely test the trendlines shown on the chart.
Technically ,we like the downside in the medium term because the trend is clearly down. In the short term, however, the hammer pattern is bullish and we expect to see NZD/USD rally to 0.7100 initially. We would be a seller of strength, but not until 0.7150 with a stop at 0.7177.