NZDUSD has been on an uptrend on its 4-hour chart but just recently bounced off the top of the rising channel.

Price is now headed towards the bottom of the range at the .6600 major psychological level, which might still hold as support.

This channel support zone lines up with the 200 SMA dynamic inflection point. The 100 SMA is above this longer-term moving average, hinting that the uptrend might still continue. However, a break below the .6600 mark and a downward SMA crossover could confirm that a reversal is about to happen. 

Stochastic is heading down and is nearing the oversold area so sellers might need to take a break and allow buyers to take over. RSI is also on the move south so further losses are possible until the oscillator reaches the oversold region.

Earlier today, the RBNZ decided to cut interest rates from 2.50% to 2.25% to the surprise of those who predicted that they would hold. Policymakers cited concerns about a slowdown in China, the emerging markets, and even in Europe as reasons for the commodity price slump, which is making it difficult for their dairy sector to recover. In addition, RBNZ head Wheeler noted that they’re open to additional rate cuts in order to bring inflation back to their target levels. 

There were no major reports released out of the US, and the medium-tier crude oil inventories report came closely in line with expectations. US initial jobless claims data is due today, along with natural gas storage data and the federal budget balance.

The upcoming ECB statement could affect overall market sentiment, with a strong return in risk aversion likely to push NZDUSD much lower. A break below the channel support could lead to a selloff until the area of interest at .6400. A bounce, on the other hand, could lead to a climb close to the .6600 resistance.

By Kate Curtis from Trader’s Way