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NZD/USD reverses ahead of June 2020 low to trigger RSI buy signal

NZD/USD carves a series of higher highs and lows after trading to a fresh yearly low (0.6216) earlier this month, and the exchange rate may stage a large rebound as the three-day rally pulls the Relative Strength Index (RSI) out of oversold territory.

The move above 30 in the RSI is likely to be accompanied by a further advance in NZD/USD like the behavior seen earlier this year, and the bearish momentum may continue to abate as the indicator breaks out of the downward trend from earlier this year.

NZD/USD appears to have reversed course ahead of the June 2020 low (0.6185) as it struggled to close below the 0.6230 (61.8% retracement) region, with recent series of higher highs and lows raising the scope for a larger rebound in the exchange rate as the RSI climbs above 30 to offer a textbook buy signal.

Need a break/close above the Fibonacci overlap around 0.6370 (50% retracement) to 0.6430 (78.6% expansion) to open up the 0.6470 (50% retracement) to 0.6480 (78.6% expansion) region, with the next area of interest coming in around 0.6570 (61.8% expansion), which lines up with the monthly high (0.6568).

However, failure to push above the overlap around 0.6370 (50% retracement) to 0.6430 (78.6% expansion) may generate range bound conditions in NZD/USD as the 0.6230 (61.8% retracement) area appears to be acting as near-term support.

NZD/USD daily chart

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The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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