FX.co ★ Wiking | NZD/USD

The New Zealand Dollar declines against the US Dollar (USD) on Tuesday, weighed down by risk-off sentiment amid rising tensions in the Middle East and higher crude Oil prices. The NZD/USD pair continues its pullback from around the 0.5900 level on Friday, dipping to a daily low of 0.5836, below the key 200-day Simple Moving Average (SMA) at 0.5850. Market sentiment remains cautious as tensions between the US and Iran continue to rise, dampening expectations for a resolution through negotiations. Tehran warned that it would target US Gas and Oil installations in Gulf countries in retaliation for an attack on Iran. Meanwhile, oil passing through the Strait of Hormuz, which transported about 20% of global oil before the war, has now fallen to a trickle, pushing prices up. Brent Oil is trading above $97.00 per barrel in the European trading session today, up nearly 9% in September so far and 38% above July lows. This will make New Zealand vulnerable to another energy shock. Chinese economic data showed a widening trade surplus in August despite weaker imports. This implies domestic demand remains sluggish and did not support the China proxy NZD. The NZD/USD currency pair continues to trade at 0.5843. The NZD/USD currency pair displays a negative short-term outlook. Sellers pushed the pair below the 200-day SMA, which stood at 0.5854 at the time of writing. This is significant because it signals rising downside momentum. In addition, the NZD/USD currency pair approaches the neckline of a bearish Head and Shoulders (H&S) formation. The neckline is set around 0.5800-0.5820. Technical indicators also show weakening momentum. The RSI indicator has dropped to the low 40s. While this is still above the oversold region, the move has been in the wrong direction. The MACD indicator is also showing bearish momentum. The MACD line is below zero while the histogram is negative. A clear breach below 0.5800 would further support the bearish bias. This will not only confirm the H&S pattern, but it can also open the possibility of lower levels. The initial downside level is around 0.5765, the July lows. A break below 0.5765 will set sights on 0.5745, the July 13 low. Additional selling may bring out the support level at 0.5626 set on June 26. The target price generated by the H&S formation is lower than this level. This is one possible risk if sellers take complete control of the market. On the other hand, the negative sentiment may start to wane once the bulls get involved. Any rise above last Friday's high at 0.5900 may mark the start of a recovery. For now, the region between 0.5800 and 0.5820 continues to act as the major support region for the NZD/USD pair. A breach below 0.5800 could strengthen the negative view and open up more room for declines. Meanwhile, a move above 0.5900 could ease selling pressure and help the bulls regain control.