Uptick falters near head & shoulders neckline support breakpoint

NZD/USD gained some positive traction on Tuesday and moved away from three-week lows.
The overnight break below the head and shoulders neckline support favours bearish traders.
The pair could slide to test the 0.7040 support before eventually dropping to the 0.7000 mark.

The NZD/USD pair gained some positive traction on Tuesday and recovered the previous session’s losses to three-week lows, albeit lacked any strong follow-through.

Given the overnight break below the 0.7145-40 horizontal support, marking the neckline of a head and shoulder chart pattern, the near-term bias remains tilted in favour of bearish traders. The NZD/USD pair’s inability to capitalize on the intraday positive move adds credence to the negative outlook.

Moreover, technical indicators on the daily chart have just started drifting into the negative territory. This, in turn, supports prospects for an extension of the recent corrective pullback from multi-year tops, or levels beyond the 0.7300 round-figure mark touched earlier this January.

Hence, some follow-through weakness towards the 0.7040 intermediate support, en-route the 0.7000 psychological mark, looks a distinct possibility. The latter represents the bearish pattern target, which should act as a key pivotal point and help determine the NZD/USD pair’s near-term trajectory.

On the flip side, recovery attempts beyond the neckline support-turned-resistance might confront resistance near the 0.7170-75 region ahead of the 0.7200 mark. Any subsequent move might be seen as a selling opportunity and runs the risk of fizzling out rather quickly near the 0.7235 supply zone.