NZD/USD is currently exhibiting a bearish three-wave pattern, known as a Measured Move, indicating a potential downtrend.
This pattern typically consists of three waves labelled ABC, with waves A and C often being of similar length or related by a Fibonacci ratio.
Based on this pattern, NZD/USD is expected to decline towards a target of around 0.5847, which corresponds to the end of wave C. The pair has already breached the conservative target for the pattern at 0.5988, where wave C equals a 0.618 Fibonacci ratio of wave A.
The short-term trend for NZD/USD is bearish, suggesting a continuation of the downtrend. However, it’s worth noting that the Relative Strength Index (RSI) momentum indicator, which closed at 29.32 on Monday, indicates an oversold condition. This could potentially lead to a pullback in price.
Traders should monitor the RSI closely:
- If the RSI exits the oversold zone, it could signal a potential upward movement, prompting traders to close their short positions and consider opening long positions.
- Conversely, if the RSI remains below 30 in the oversold zone, it suggests that traders should maintain their short positions without adding to them.