Yesterday, we talked about NZD/USD and warned about a retest of the critical uptrend that was broken on Nov. 27. We warned that we may see another retest of that trendline and that is exactly what happened today.
Bounced right off the trendline
After testing the trendline immediately after the FOMC decision, we saw a sharp reversal. Given the violence of the reversal (90 pips in less than two hours), continued downside follow-thru is the favoured scenario.
The potential for a quick drop to the weekly lows around 0.7100 is a defintely possibility but we have to continue to guard against a break above the trendline, which will come in around 0.73 again in the day ahead.
If we can break below 0.7079, expect downside momentum to pick up.