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Transcript of Video
We’re going to get started today on the New Zealand Dollar versus the US Dollar [NZDUSD]. I’m going to start all the way out here on the Monthly Chart because I think it’s important, especially this time of the year. Going here into the end of this year, the beginning of the new year this week, I think it’s important for us to take a longer-term perspective of the currency pair, so we might understand what’s going to happen with this currency pair over the next few weeks, months, or even throughout the next year for the NZDUSD.
Let’s start here on the Monthly Chart. We could see that for the long-term it’s been in an uptrend. We go all the way back down here, even into 2009. We could see the current market price was down here into the upper-0.4800s, 0.4900-level, down there into March of 2009. Started an uptrend and began moving higher, making new highs as it pushed all the way up here into or towards the 0.8900-level at the very top of the chart.
So, let’s go ahead and zoom it in. Now that we could see that history, there’s the same bottom low there. Interesting is this red box, and that actually goes back to September of 2010, where we got up inside that red box, began finding support at the bottom into the mid-0.7500s, and basically, since 2010, we’ve been bouncing around inside this larger, red box or range here for quite a long time now, since 2010.
Over the past several months, we’ve seen it into the resistance high at the top of the red box. Guess what. Now we’re at the very bottom of the red box. So, clearly, as it dips down here, there’s potential for support and reversal. That’s what’s happened since 2010. It doesn’t have to, but definitely something that we want to recognize and pay attention to. Obviously if it breaks down underneath this red box, gets through the 0.7500s, we’ll look for further movement south, as it may even push back down to Fibonacci, which sits down here at .382 at 0.7325. That’s down there into this period of congestion. The resistance you see here also.
So, interesting stuff going on there on the Monthly Chart. Let’s take it on down to the Weekly Chart. This is something we’ve been studying in the Trade Room for many months now. These two blue boxes that you see here on the chart. First off, the blue box on the left-hand side of the chart. We’re looking down into the 0.7700-level, the blue-shaded area. For a few months, it found support back here into 2013. Support into that blue-shaded area. Moving all the way back up into the pink zone, into the 0.8100-level for a few months. Bouncing around there, eventually breaking to the topside and continuing the uptrend.
Well, that’s important because I want to point that out, because if you go back here to the right-hand side, the blue box is a little bit smaller, it doesn’t see the same resistance highs, but the support lows are very interesting because it’s exactly the same. 0.7700. The boundary for support. As long as it stays above it, it continues to bounce up, bounce up, and bounce up. Eventually we may see the breakdown of that continuation of our current downtrend leg that we see here, but we definitely want to pay attention to that blue zone.
The closer it gets to the blue-shaded area, the closer it gets to 0.7700 is very discouraging about selling it, but it doesn’t mean we can’t sell it. The trend is down. We want to sell it in the direction of the trend. So, where do we sell it? We sell it as it bounces higher into resistance. So, what we need to do is look for those resistance and those opportunities to sell in the direction of the trend. We also want to be mindful and cognizant of the fact that trends change and if, over time, we start to see a change of the trend pattern, we look for a change of the trend.
Let’s go ahead and take all of that information down to the Daily Chart. And I’m going to zoom out one time here. There’s the downtrend. Here’s our current leg or current area that we’re watching right now. We’ve been in a downtrend. If you’re going to sell the downtrend, you sell resistance. We’re looking for resistance. If you’re going to buy it and look for a change of the trend pattern, what you’re looking for is a change of the pattern. A downtrend has lower highs and lower lows. You’re going to start looking for higher highs and higher lows, and I don’t think we have those yet.
I think we might have a little bit of a higher high right here, or sorry, a higher low into the blue-shaded area. You see the low here and this low here. A little bit of a higher low, but no higher high yet. So, we’re still within the parameters of the downtrend. Interesting is the blue box here. Let’s zoom it in one time. The blue box. The orange-shaded area at the very top into the mid to upper 0.7900s holding as our resistance for several weeks now. The blue-shaded area, of course, we’ve already discussed as support.
The other two areas that you see here inside the blue box, the green zone and the yellow zone also hold very interesting information there. We could see historical support and resistance along that, and I say support over here on the left in the yellow zone. Resistance over here on the left. Here’s resistance here. So, that holds some interesting information, and also the blue trend line connecting our last highs inside the blue box with the blue trend line sits right there and the yellow zone. So, there is one area of potential resistance right here at the yellow-shaded area. And we’ve already said if we’re going to sell it, we want to sell resistance. So, that’s one area.
A little bit of a shorter area is the green trend line, the green-shaded area that comes across. You could see the last time we were here we found resistance just a few days ago. A couple of weeks ago. We saw resistance here in the green zone. We’ve seen support. We’ve seen resistance. We’ve seen support all along that green-shaded area. So, that, again, becomes an opportunity for resistance.
So, once again, if you’re going to sell the direction of the trend, these are your two opportunities to do so, and very interesting, that’s where we are today. We’re right there inside that green-shaded area, right around 0.7800. Clearly an important price level. 0.7800. So, as long as it stays underneath there today, I think there’s a possibility that we look for a low-risk, higher potential reward opportunity to sell inside the green-shaded area. The risk of course is that it breaks the green zone. So, very limited risk if you decide to take a sell in the green zone. If it breaks above it, you probably don’t want to stay in it because you have a feeling that it’s going to go back up to the blue line and the yellow-shaded area.
Our support target of course is the blue-shaded area, as close as possible to 0.7700. And over time, we see a continuation of the downtrend on a break of that blue-shaded area. So, really, if you look at the four black arrows that you see here on the chart, there’s three opportunities for selling and potentially one opportunity for buying, looking for reversal of the trend. Three opportunities for selling. The green zone and the green trend line for selling. The yellow-shaded area and the blue trend line for selling, or underneath 0.7680, 0.7700, underneath the blue zone, you look for a selling opportunity. Otherwise, as close as possible to the blue zone, 0.7700 could become an opportunity to buy it.
Interesting enough, this week we see the Forex Black Book turning green. I don’t think I’d trust that yet. I don’t think that’s good enough. I don’t think we’ve seen upward enough momentum to trust the green trend bar, Forex Black Book. I still think we’re in a downtrend.
Take it on down to the 4-Hour Chart. There we are. We get a little bit closer to the market. Fibonacci may or may not be very beneficial here since we’ve been in the longer-term range. I think most beneficial is the green trend line and the green-shaded area. Again, let’s bring this down a little bit closer. If you’re going to do anything today, I think you’re looking for potential sells here into 0.7800, 0.7815. A break above there, we look for it to go higher. It’s a different week again this week. We’re coming to the end of year, so be careful. Use appropriate trade sizes.
Again, I’m not really trusting the Forex Black Book green trend bar just fresh changing over this week, but definitely watching for further clues of support and reversal to go back up. That may be the break of 0.7815. We look for it back towards 0.7860 or even towards the yellow-shaded area. 0.7900. But for the day, selling under the green zone I think will probably be our opportunity.
Let’s take Fibonacci. Just this little down range right here. .618 Fibonacci retracement level at 0.7799. Just this little leg right here puts the .618 right at the green zone. So, if you’re going to do anything today, I believe selling here at the green zone, 0.7800 is an opportunity. You look to target the blue-shaded area or lower. Your risk is above 0.7815. Now, how high above that you put it will depend on each unique risk tolerance that every trader has, but I think at least above 0.7820 would be an appropriate stop loss. If it breaks the green zone, I don’t think you want to stay in a sell any longer. So, selling here, targeting the blue zone today, but being very watchful for the break of 0.7815 for the NZDUSD today.
