NZD/USD Forecast July 20, 2016, Technical Analysis

The NZD/USD pair initially fell during the course of the session on Tuesday, but ended up bouncing off of the 0.70 level in order to form a bit of a hammer. The hammer of course is a bullish candle and as a result I feel that this market could very well try to break out to the upside from here. After all, this is an area that has been supportive in the past, so a hammer here is roughly what you would look for if you are bullish. On the other hand, if we can break down below the 0.70 level that would be a very bearish sign and we could very well fall from there. I believe that the next day or so will be very important for the direction of the New Zealand dollar going forward.
I recognize that the shooting star from the previous session of course is very negative, so I would expect quite a bit of volatility. Also, you have to keep in mind that the New Zealand dollar is highly sensitive to the commodity markets, and as a result it will be a market that takes a lot of confidence to get involved in. You have to be able to deal with quite a bit of volatility. However, this area has been rather reliable in the past, so it does make sense that perhaps some traders out there will be looking at this market as being at an area that buyers could be interested in going into the market and push it higher.
The 0.73 level above could very well be considered to be a “ceiling in this market”, and a break above there would be a very bullish longer-term signal. In the meantime, I think that we will have quite a bit of volatility regardless what happens next, and as a result I feel that the move could be very choppy and destructive if you are not careful. Because of this, I may have an inclination to trade this market to the upside but with a smaller position than usual.