I am watching for a daily close below the 12 May high (NZ$1.0886 – circled) and 38.2% retracement of the April to July rally (NZ$1.0897) to look at short positions. This would effectively mean being willing to accept a worse price, but I am waiting for confirmation from the market that the buyers are not prepared to step in and support key levels.
The trend is progressively becoming more bearish and as you can see from the daily chart, there is a confluence of support levels that I am keen to see the pair close below. In terms of identifying a stop loss, I feel that a stop loss above the 7 October high and rising trend (drawn from the July pivot low) at NZ$1.1010 makes sense, as this would suggest a stronger move higher, making my initial view incorrect.
Looking at the various oscillators, the fact that the nine-day RSI is at low levels is a reflection of the recent sell-off and is not yet grossly oversold. Stochastic momentum is clearly at low levels, but it feels as though rallies should be contained within a progressively bearish trend.
The 50% retracement of the April to July rally is a clear initial target at NZ$1.0733, although I would look to see how the pair is reacting around this level as it may even pay to add a potential short position if the momentum continues to build.
This is a technical idea based on momentum and, to a degree, trend. I have placed a five (blue) and ten (red) moving average on the chart to highlight the trend.