The NZDUSD pair is up for the fourth day in a row, gaining 0.31% as risk sentiment starts to weaken. However, there are signs that the upside move on the pair is starting to stall. After yesterday’s big bullish candle, the Wednesday candle has shown a rejection of the price action at the 0.62768 resistance level.
What is responsible for the sudden pullback in risk-associated currencies? This Wednesday, China announced a higher COVID-19 new case count, prompting fears of more lockdowns and reduced commodity demand. China is New Zealand’s leading trade partner. NZ supplies wood and meat products to China and also accounts for half of its dairy product consumption. Total trade exports to China from New Zealand top $20.1 billion, and lockdowns dent the NZ-China trade volumes.
The situation also comes with risk aversion and the associated demand for safe-haven assets such as the US Dollar. Moreover, preemptive USD demand will likely start entering the market as the Fed decision day approaches. Technically speaking, the intraday retreat forms a pinbar pattern, which could have further bearish implications for the pair if the risk sentiment worsens.
The break of the falling wedge on the daily chart and the subsequent breakout move appears to have stalled at the 0.62768 resistance line (10 May and 17 June low). A break above this level is required to push the breakout move towards its completion point at 0.63820 (11 May high and 9 June low). The 0.64256 price mark (24 May and 7 June lows) and the 0.65050 resistance level are additional barriers to the north that enter the mix on a price advance beyond the 0.63820 barrier.
Conversely, an extension of the rejection move at 0.62768 makes the 0.62220 pivot vulnerable. The Investingcube S-R indicator sees this support level as the area to initiate new buy orders for the pair. However, a decline below this level and the 0.61548 support will invalidate the bullish view and cut a pathway toward additional harvest points for the bears at 0.60968 (11 July low) and the 0.60072 support level.