NZD/USD is gaining altitude, having witnessed a bull flag breakout – a continuation pattern – on the hourly chart. The bullish pattern has opened up upside toward 0.6860 (target as per the measured move method).
That level could come into play during the day ahead, courtesy of the US-China trade optimism and signs of revival in the global industrial cycle.
The closely-watched Caixin/Markit manufacturing PMI, released on Monday, rose to 50.8 in March, the highest reading in eight months. Meanwhile, the official manufacturing PMI rose to 50.5 in March, while non-manufacturing PMI rose to 54.8, both painting a positive picture of China’s manufacturing and services sectors.
The bullish case in the NZD, however, would weaken if the spot falls below 0.6776, invalidating the flag breakout.
That said, a close below the 200-day moving average (MA) line, currently at 0.6738, is needed to put the bears back in a commanding position. That average has reversed pullbacks at least two times in the last six weeks.