NZD/USD Price Analysis: Kiwi bulls challenge 20-EMA, exhaustion signs indicate a bullish reversal

The formation of a bullish divergence bolsters exhaustion signals.
The 20-EMA is testing the strength of the kiwi bulls.
Momentum oscillator RSI (14) has shifted in the 40.00-60.00 range.

The NZD/USD pair has displayed a volatility contraction as the asset is oscillating in a narrow range of 0.6280-0.6310 from the previous trading session. Earlier, the asset witnessed an extreme sell-off after slipping below the previous week’s low at 0.6394.

The greenback bulls are showing signs of exhaustion after a prolonged south move. A bullish divergence has been formed on an hourly scale that adds to the bullish reversal filters. The asset formed a lower low at 0.6276 while the momentum oscillator, Relative Strength Index (RSI) (14) denied forming a lower low, which shows exhaustion in the downtrend. The RSI (14) has shifted to a 40.00-60.00 range from a bearish range of 20.00-40.00 but seeks more validation.

The 20-period Exponential Moving Average (EMA) at 0.6303 is testing kiwi bulls’ strength and responsive buyers’ action to provide a green signal. While the 50-EMA at 0.6327 is still favoring the downside.

For a meaningful bullish reversal, kiwi bulls need to violate the trendline placed from near Monday’s high of 0.6372 at 0.6320. This will drive the asset towards Tuesday’s high and Wednesday’s high at 0.6349 and 0.6377 respectively.

On the flip side, kiwi bulls could lose support if the asset tumbles below Tuesday’s low at 0.6276. This will drag the asset towards the 28 May 2020 high at 0.6228, followed by the round level support at 0.6200.