Yes, I know I haven’t been as prolific recently with my posts, so here’s a quick one on NZDUSD.
I was bullish on NZDUSD for 2016 – up until the weekly head and shoulders pattern set-up. The 0.73 level provided significant resistance as part of that H&S pattern, and price fell away from 73 down to the 0.6850 – 0.6900 zone. (Part of this move being aided by the Trump election Dollar strength trade).
Interestingly since the start of 2017 we’ve had NZD strength re-emerge into the markets and we had a price move into STAM2 territory from 11th January and then STAM1B from the 16th Jan. From here price moved nicely north…….until it ran into the 0.73 level again!
As always I like to see what the Price Action is like. How does the market react at a significant level of support or resistance? Well the hourly and 4 hourly chart didn’t really give too much away – price was quite choppy at the 73 handle. It was only on the daily where we ended up with a nice bearish engulfing pin-bar (that some would also call a fakeout) that let us know that a) the uptrend was over and b) the 73 handle was likely to hold. Next day provided a domino candle and you could tell the shorts were on-board. See chart below.
When that week finished we had another nice bearish engulfing candle – and much like the similar patterns from 10th July and 6th November the ended the up-trend at the 73 level. People have commented that price can never rally above 73 due to the NZD Government interventions / fears of appreciation. I am as always sceptical when someone says that price can never break a level. At some point it always will!
So price fell nicely to the 200 DMA and my next target is in the region of the 71 handle – which would also be around the 50% move down of the trend from the 23/12 low to the 07/02 high. Then, as always, I will wait to see how price reacts – could it launch itself back at the 73 handle? If so could it form a nice ABCD pattern (and finally break 73). Or will it fall away to the 69 handle thereby providing us with a nice range? As always, price will lead the way.
Trade well.
Paul
January 2017