NZDUSD forming a reversal pattern

The New Zealand dollar has been rising steadily against the U.S. dollar for the past 10 months. From the 0,5468 bottom on 19 March 2020 the pair rose to 0,7205 on 6 January. This is a significant 33,76% rise during this period. One of the reasons  is the weakening American dollar, which has lost value against most of the currencies. Hopes for the vaccine and the fiscal stimulus made investors confident in the markets, which made record highs recently and sent the dollar lower.

The USD is viewed as a safe haven currency, the demand is rising in times of uncertainty and falling when markets are strong. In the current bullish environment investors are willing to take more risk, so they are buying stocks and currencies like the kiwi (another name for the New Zealand dollar). However, the pair might have a correction soon to take a rest, before continuing to higher levels.

The NZDUSD pair made a lower low (D) on the 4 hour chart this Monday and looks like it is forming a head and shoulders reversal pattern (A,B,C). If the price breaks the neckline (blue line on the chart), it would confirm the lower high reached today (C) and the reversal pattern will be completed.

Breaking the neckline and the lower low (D) will put the bears in charge at least in the medium term and could send the course to the nearest support level around 0,7090 (E). Further weakness could be tested at around the 0,7030 level (F). Conversly, if the price rose above the recent high (C), that would show the bulls taking over and send the course higher.