NZD/USD eyes neckline support on bearish NZ GDP forecasts

The offered tone around the NZD gathered pace, pushing the NZD/USD pair to a session low of 0.7250 after the NZ Treasury trimmed GDP forecasts. 

New Zealand pre-election Economic and Fiscal update [PREFU] released today showed the Treasury expects the Reserve Bank of New Zealand [RBNZ] to kick-off the tightening cycle in mid-2018. The Treasury also sees a smaller surplus in 2019-21 on lower growth. 

Head and Shoulders pattern on the daily chart

The neckline of the bearish reversal pattern is seen at 0.7226 levels. The pair looks set to test the neckline level after repeated failure at the 50-DMA in the last few trading days. 

NZD/USD Technical Levels

An end of the day close below 0.7226 would mark the head and shoulders breakdown down and signal the rally from the May low of 0.6818 has ended. Under the neckline, major support levels are seen at 0.7188 [50% Fib R of 0.6818-0.7558] and 0.7166 [100-DMA]. On the other hand, a break above 0.7275 [38.2% Fib R of 0.6818-0.7558] could yield a re-test of 50-DMA of 0.7329. A daily close above the same would revive the bullish move and open doors for 0.74 handle.