NZDUSD has been rallying lately but appears to be hitting a roadblock at the top of its descending channel on the 4-hour chart. This lines up with the 50% Fibonacci retracement level and the 200 SMA dynamic inflection point.

The 100 SMA is below the longer-term 200 SMA to confirm that the path of least resistance is to the downside. In other words, the downtrend is more likely to continue than to reverse. However, the gap between the moving averages is narrowing to reflect slowing selling pressure. The 100 SMA also recently held as dynamic support in the latest dip.

RSI is pointing down without hitting overbought levels to signal that sellers are eager to return. Another drop to the .6650 minor psychological mark could complete a short-term double top, which is a classic reversal formation. A break below the neckline could pave the way for a move down to the swing low at .6530 or the channel bottom closer to .6500.

Stochastic is also pointing down after recently making it to overbought levels, indicating that selling pressure is returning and NZDUSD could follow suit.

The Kiwi got a boost from news of the bilateral trade deal between the US and Mexico as this eases global trade uncertainties. This could also lead to smoother talks with Canada and also an agreement among the three nations, which would further prop riskier currencies up.

However, the Kiwi’s gains are capped by the downbeat bias of the RBNZ. Recall that the central bank downgraded economic estimates and pushed back rate hike expectations in their latest statement.

On the flip side, the dollar could later on draw support from better trade conditions as this would lift uncertainty off US businesses and likely fuel speculations for two more hikes this year. The US preliminary GDP is due this week and could provide more clues on how the economy is doing.