In the last year, we have seen a steady rise in the NZDUSD forex pair. The exchange rate has seen more than 33% growth since March last year. In the current positive environment, investors are willing to take more risk and are therefore buying stocks and currencies such as the Kiwi (another name for the New Zealand dollar). News of the distribution of the Covid-19 vaccine and the fiscal stimulus to the US economy have boosted demand for equities and markets have reached record highs.
At the same time, the US dollar lost value against most currencies. The USD is considered a safe-haven currency, with demand rising in times of uncertainty and falling when markets are strong. However, after last year's rise, some traders are expecting a correction in the NZDUSD exchange rate.
On the four-hour chart, the pair appears to form a head-and-shoulders pattern (orange marks over the peaks). If price fell through the neckline (separate blue line), this would confirm the completion of the trend reversal formation. In that case, the bears would have a chance to control the rate at least in the medium term and could push it to the nearest support level around 0.7100 (B).
In case of further weakness, the price could test support at around 0.7030 (A). Conversely, the bulls would still be in control and could send the price higher if the price rises above the recent peak (0.7240).