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I’m going to begin the day today on the New Zealand dollar versus the US Dollar [NZDUSD]. Over the past several days, we have seen an up trend for this currency pair, as it rose from down here into the low-0.7700s all the way back up here into the 0.8400s. Now, over the past few days, we’ve seen a little bit of a retracement of that previous up trend as it came back down here into the mid-0.8200s – this yellow-shaded area that’s highlighted at the top of the chart.
Follow that yellow-shaded are backwards in time and we can see some historical congestion back here on the left-hand side of the chart, some historical support on top of that yellow-shaded area, and some historical resistance underneath that yellow-shaded area. So, that yellow highlighted zone historically has shown as resistance, support, and congestion back in time for the NZDUSD.
Now, taking that information back to the current time, we could see, yesterday, the day before that, the last two red candles holding as support within that yellow-shaded area and now today’s candle finding support and rallying a little bit higher. The question of course is: are we looking at a return of the longer-term up trend and we look for a new high to be made, or is this simply a pullback from the downward motion that we’ve seen and we’ll look for a turn back down in the direction of a trend reversal?
Well, that’s a good question, so what we’ll need to do is find our lowest risk, highest reward opportunities to trade based on either one of those scenarios. Now, if we’re looking for it to continue to pressure higher in the direction of the trend, there’s really two opportunities here for the NZDUSD. It either dips back down into support. Basically this yellow-shaded area giving us a fairly low-risk opportunity to buy it. Then we look to challenge back to the blue zone. A break of the blue zone, we go higher. The second opportunity to buy it would be that break of that blue-shaded area. If it gets above there once again, then we expect it to go higher towards the green zone.
Follow that blue-shaded area backwards in time. Of course, in the most recent days, we’ve seen a little bit of support on top of that blue-shaded area, but interesting enough. Follow it back to the left-hand side of the chart; you could see some historical support back here on the left-hand side, some resistance, and some major support going back here into January and February of 2013. We can see some major support as the market went into a bit of a range between that blue-shaded area and the green-shaded area at the top.
So, buying situations today are dips into the yellow zone or possibly even lower become buys into support. The other side of the story would be a break above the blue-shaded area. Look for a continuation of the up trend. Now, that doesn’t necessarily mean that’s what’s going to happen. We could definitely find resistance once again as it rallies back into this blue-shaded area. Historically we could see that happening back here. The last time, where we broke underneath that blue-shaded area, challenge back into the blue zone, and then fell once again back down to the purple-shaded area.
Over here, on the left, we could Live Sex see it broke underneath the blue-shaded area and continued the bearish trend. So, as long as we stay underneath it, there is potential for resistance. So, I’ll be looking for resistance closer to that blue-shaded area, into the 0.8330s/0.8350s. That’s likely to be our next resistance and the potential to go back down. So, if you’re looking on the other side of this and you expect we’re looking for trend reversal and a selling opportunity here for the NZDUSD, that becomes your lowest risk, highest reward opportunity, because you just don’t want to see it break back above that blue-shaded area.
The other side of the story, of course, is the yellow-shaded area, which we’ve already identified as our current support. A push back underneath that yellow-shaded area likely looking for the turn back down towards the purple zone, which is into the 0.8160s or so, or beyond that, we could even see it down here into the mid- to low-0.8000s, back towards this pink-shaded area, down towards the bottom of the chart. So, either way you look at it, whether you’re buying or selling this currency pair, looking for a continuation of the up trend or trend reversal for this to continue down, your two main areas to focus on are the blue-shaded area and the yellow-shaded area.
Take that information down to the 4-Hour Chart. And as we get down here to the 4-Hour Chart, we could see that blue-shaded area coming into play as the market challenges a little bit higher and challenging into resistance. Remember, to find your lowest risk, higher reward opportunities, you want to buy low and sell high. So, if you’re looking to sell it, the closer you get to the blue zone becomes that opportunity.
Also, taking a trend line, connecting just the last couple of highs that we’ve seen here on the NZDUSD also puts a bearish trend line representing this bearish movement we’ve seen over the past few days right there into that blue-shaded area. So, again, that becomes an opportunity for resistance and a selling opportunity to go back down in the direction of the trend that’s been in place basically since last Wednesday of last week. Taking that into account also, a push back above the blue zone, again, as we mentioned, likely looking for it to go back higher. And then, of course, if it breaks underneath this yellow-shaded area, we’ll likely look for the continuation lower for the NZDUSD.
Taking a look at the Forex Black Book, we could see that today the trend bar has turned dark green, showing some disagreement between the longer-term and shorter-term or faster and slower moving trends. The faster moving trend right now pushing lower where the slower, longer trend has been pushing up for the past several days. So, it turned green as we were pressuring higher. Now that we see some bearish pressure here for this currency pair, it’s turned dark green because we see some disagreement. If we’re going to see this continue to pressure higher, if it pushes above the blue-shaded area at the top of the chart, breaks through that resistance, over time I would expect that that trend bar at the bottom may turn bright green once again.
If it doesn’t, finds resistance, breaks back underneath the yellow-shaded area, and goes back down towards the purple or pink-shaded area, it’s likely over time that that trend bar will turn red. So, definitely a period of indecision. Are we going to continue the bullish trend or are we turning this into a down trend. Your best opportunities to trade this pair in either direction will either be the blue-shaded area for resistance or the yellow-shaded area as your current support for the NZDUSD today.
