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Transcript of Video
I’m 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, first off, to get a longer-term perspective. I think that’s important to do as we go into these last couple of weeks of 2014. The potential volatility we could see around the holidays, and then, as we go into the new year, what we might expect to see as we go into that new year.
We’re going to start on the Monthly Chart. We’re going back here to the left-hand side. We could see back in 2009 the market bottomed out, right down here into the 0.4900-level. So, way down here at the very bottom of the chart. Over the next couple of years, took a strong move that pushed all the way up into the highest high, in towards the 0.8800-level at the top of the chart. And then, since then, that’s going all the way back to 2011, we’ve just been kind of bouncing around in somewhat of a range.
We’ve been bouncing from those highs around the 0.8800-level, down to the lows here into the 0.7600s and 0.7500s, and then back up, back down, back up, and here we are, coming right back down. 0.7700 or so, bottoming out as our support. If we continue to break lower, if we break through these last couple of lows we see within the previous uptrend, and of course we might expect much further pushes down into the 0.7000 range or even into the 0.6000s. If we take Fibonacci of the longer range, we take Fibonacci from the low to the high and actually let’s go up to this high right here. We can see already that we’re underneath the .236 fib. The .382 for that range right there. In fact, let me make sure it’s on the highest high there. The .382 of that range lives at 0.7300, so quite a bit lower even than the current market price for the NZDUSD.
So, still some room to go, but it’s got a pretty important barrier to break through here on the Monthly Chart. Let’s zoom it down to the Weekly Chart. Get a little closer view, and here’s something very important we’ve been studying in the Trade Room for many weeks now, and it’s these two blue boxes, and right around the 0.7700-level. We’re looking about 25 pips below it, 25 pips above it, but right around the 0.7700-level. You see the blue-shaded area at the bottom of the chart. We go all the way back to 2013. Support here into the bottom of that blue box and the blue-shaded area. And over the past several weeks, going back a couple of months now, September or so, we’ve been finding support there again.
And clearly, as we mentioned from the Monthly Chart, if it can break through these supports, we’re looking at much deeper. 0.7500, 0.7400, 0.7300-level if it can breakdown through this support, but so far, since 2013, we’ve been unable to do that, but I still think we need to focus our efforts in the direction of our current trend, which is this downtrend that we’ve been following for the past several weeks. So, all that means is that we’re selling. Every time it hits a resistance, we sell it. Resistance. Goes down. Challenges support. We close profit. Protect the trade. If it breaks it, great. We look for it lower. If it doesn’t, at least we protect the trade.
I’m not really, at this point, looking for buying because there’s no real evidence of reversal yet. Evidence or reversal would be higher highs and higher lows, and that would be the change of the trending pattern. So, not really looking at that yet, but still there is the possibility down here at the bottom of the chart.
Take it on down to the Daily, and we could see over the past few weeks, we’ve just been kind of bouncing around in this range, going all the way, again, back to September, bouncing around inside this blue box. Multiple times challenging the 0.7700-level. One time we thought we broke out underneath it here. A false breakdown, and then we went right back up. Now here we are again. For the day today and probably I would venture to guess, and you know, this is of course just speculation, that we might even see it hold above the 0.7700-level for the rest of the year.
Now, if it breaks underneath there, we already know that it could go back down, but that is the expectation. We continue to hold here as support around 0.7700, unless we get some major news to knock it out of this range. So, that’s one opportunity, buying into support. Minimal risk underneath – we’ll call it – 0.7675 or so. The bottom of the blue zone. If it breaks there, you don’t want to stay in a buy. That’s one opportunity. I think the better opportunity, and this is of course trading in the direction of the trend, is selling resistance. That would be my preferred opportunity, as we look for it to go back up.
And at this point, that would be the green-shaded area. The green-shaded area right around 0.7780 to 0.7815. That’s the green zone highlighting historical support and resistance. That’s the green trend line coming down from the top. If you’re going to sell this in the direction of the trend, that becomes your opportunity to do so right there into the upper-0.7700s or the 0.7800-level. And clearly of course if it breaks above there, you probably don’t want to stay in it too long because we’re looking for it back up here towards this blue trend line, the top of our trend channel, and into the 0.7900-level.
So, these are your selling opportunities. First off, a break of 0.7700, 0.7675, the blue zone, we look for it to go lower. That’s the break of the blue zone. Support. Other opportunity to sell would be back into 0.7785. 0.7800. The green zone. Green trend line. And lastly, back up here to the yellow zone. The blue trend line. The top of our trend channel. Those are your three selling opportunities in the direction of the trend. Countertrend traders, people looking for it to go back up, likely looking for those opportunities as close as possible to 0.7700. Risk goes underneath. If it breaks underneath, we look for it to go back down.
100-day moving average sits up here at the top of our range. Definitely could provide some resistance if we see a push back up there, but at this point, not really something to watch. The Forex Black Book trend bar is red this week. So, if you’re looking for selling signals with the Forex Black Book, it is red. That is in the direction of the trend. That’s good news. So, how do you trade the Forex Black Book? What you do is you come on down here to the 4-Hour Chart and what you’re looking for are, first off, rallies to resistance and then selling opportunities with a red arrow.
All you have to do is look back at the past couple of weeks. We see a rally to resistance, red arrow, fall. Rally to resistance, red arrow, fall. Rally to resistance, red arrow, fall. Now that the trend bar is red, that gives you higher confidence. So, if we see it challenge the green-shaded area, that’s the Forex Black Book strategy in a nutshell, folks. Bearish trend. Rise to resistance. New red arrow. Sell it. Target the blue zone or lower. That’s the Forex Black Book in a nutshell. So, as it rallies to resistance, back to 0.7780, 0.7790, into the green zone, we’ll sell it. We’ll look for a new red arrow to confirm direction and momentum. We target the blue zone or lower on the way down in the direction of the trend. The risk is placed just above 0.7815 for the NZDUSD today.