The NZD/USD has fallen for five straight days, trading around 0.5740 in early European hours. This currency pair shows signs of a potential bullish reversal, as it’s moving in a descending wedge pattern, which indicates the current bearish trend is losing momentum. The 14-day Relative Strength Index is still below 30, suggesting that the bearish sentiment continues. Short-term momentum appears weak, with the pair trading below the nine-day Exponential Moving Average. Initial support is found at 0.5700, with the wedge’s lower boundary near 0.5690. If the price breaks below this level, bearish pressure could increase.

Potential Breakout Levels

Resistance levels to watch are the nine-day EMA at 0.5775 and the wedge’s upper boundary around 0.5830. A breakout beyond this area could shift the sentiment to bullish, allowing a test of the 50-day EMA at 0.5863. Further gains might push NZD/USD toward a three-month high of 0.6008 from September, with the next target set at 0.6121. A table shows the percentage change of the New Zealand Dollar against other major currencies, highlighting that NZD is the weakest against the Australian Dollar. The heat map gives a quick look at percentage changes among these currencies, with a clear layout of base and quote currencies. As the New Zealand Dollar continues to lose ground, the 14-day Relative Strength Index hovers near 30, indicating that the bearish trend is still active. Recent US inflation data revealed core CPI remains steady at 2.8%, which strengthens the dollar and indicates a cautious Federal Reserve. This context favors buying NZD/USD put options with strike prices near the 0.5700 psychological support level. We’re also noticing the descending wedge pattern forming on the daily chart, which often signals a bullish reversal from an oversold state. A clear break above the 0.5830 resistance level could lead to a sharp upward movement, similar to the fourth quarter of 2023, when such a pattern resulted in a multi-week rally. This potential makes purchasing call options appealing for those expecting a rebound.

Impact Of Wedge Pattern On Trading

The clash between strong bearish momentum and the potential reversal pattern suggests a significant price change may be on the horizon. Traders may anticipate increasing implied volatility on NZD/USD options as they prepare for a breakout in the coming weeks. A long straddle, involving buying both a call and a put option, could be a smart way to profit from a significant price shift, regardless of the direction. Additionally, the Kiwi’s weakness is notably high against the Australian Dollar, a trend that has continued this quarter. Recent terms of trade figures from Australia, released in September 2025, showed significant improvement, surpassing New Zealand’s performance, which explains this divergence. Traders may want to consider derivatives that take advantage of this trend, such as selling NZD/AUD futures contracts. Create your live VT Markets account and start trading now.

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