Trades entered the market without any major epiphanies about which direction NZD/USD should head on Tuesday. Early in the London session, Buyers failed in their attempt to sustain prices above the prior Apr. 13 swing low of 0.67654.
Quickly jumping on the resulting failed head under shoulders patterns, Sellers reasserted their control over the kiwi. At the time of writing, the kiwi was heading toward its fifth consecutive day of losses. The currency pair's future looks more uncertain in recent days.
More aggressive policy tightening from the Reserve Bank of New Zealand (RBNZ) on Apr. 13 has done little, if anything, to support the NZD/USD. Traders are unconvinced the RBNZ will be able to raise interest rates by 50 bps on an ongoing basis as it had done in April.
Aggressive Fed tightening, on the other hand, carries greater credibility now. Exactly how long that narrative will play out is up for question. The Fed will meet on May 4 and the RBNZ with a fresh set of projections on May 25.
Until then, there is certainly scope for further declines on a technical basis. The daily chart, which exhibits an ascending flag pattern that has broken to the downside and the descending right-angled broadening formation on the weekly time frame, opens the possibility of even lower prices.
Both 0.65884 and 0.65120 are both important levels for the pair to test. A break below the latter would mark the potential for more protracted losses. Meanwhile, near-term confidence is unlikely to be restored unless the pair can break above 0.68340.
