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I’m going to begin the day today on the New Zealand Dollar versus the US Dollar [NZDUSD], starting all the way out here on the Weekly Chart because I want you to get an overall perspective of this currency pair. Over the past couples of years, we’ve seen some consolidation on this pair, where we see rising lows along the bottom blue trend line within this pattern and falling highs, connecting the last two resistance highs in this pattern. And we could see now that the market is coming back up to challenge those resistance highs and the top of this triangle pattern that we see on the Weekly Chart.
In the most recent weeks, we saw the test all the way down here towards the bottom of that triangle into this yellow-shaded area at the bottom, into the 0.7700-level. And over the past few weeks, we’ve seen that rise, as the market has continued now to push back up towards the 0.8500s and topping out into the top of this triangle. Now that we’ve seen that, let’s take that information down to that Daily Chart.
And of course, there is that same pink-shaded area at the top of the chart. There is that top blue trend line up here at the top of the chart also coming down, connecting to our last resistance high that we see over here on the left-hand side. And of course, down at the bottom of the chart and into the yellow-shaded area is that bottom blue trend line of that triangle pattern. So, as it approaches the top of that triangle from the Weekly Chart and as it approaches our most recent resistance high on the left-hand side, highlighted there in the pink-shaded area, we can also expect some resistance.
Will this be the place where the market finds enough resistance and a complete reversal to go back down as we saw over on the left-hand side of the chart, or will this be the break point that we see a breakout of that consolidation – that triangle pattern on the Weekly Chart – and a continuation higher for the NZDUSD? We don’t know, so what we have to do is decide how we’re going to use this area.
Well, if you’re in a buy right now – if you’ve been buying from way down at the bottom of the chart, into the 0.7700s or if you bought it on the breakout of this area of consolidation or congestion here as it broke above the blue-shaded area and challenged towards the green zone, or simply if you bought it on the break above this green-shaded area at the top of the chart. All of that saying that if you bought it in the direction of the most recent trend that’s been in place along this red trend line, this pink-shaded area becomes a critical decision point, where you’ll look to protect profit. Maybe even close your trade, because history has shown us that this is likely an area of resistance.
Now, I’ve also taken Fibonacci retracement measurements from that last high at the top left-hand side of the chart down to the current low. So, from the highest high to the lowest low of this last up trend that we see over here on the left-hand side, from the top of the triangle to the bottom of the triangle, puts the .886 fib right at 0.8560, and that’s the bottom of that pink-shaded area. So, again, we see a confirmation of potential resistance into the .886 fib and into this last resistance high, and into the top of the triangle pattern.
And also, if you’re a harmonic pattern trader, if you’ve traded harmonic patterns before, or look at those Fibonacci ranges within harmonic patterns, you might also begin to recognize potential harmonics here on the NZDUSD Daily Chart with the X-point being the top-left, the A-point being that bottom of that first triangle, the B-point being here into the purple-shaded area, the C-point being down here into the yellow-shaded area and the last support low at the bottom of that red trend line, and of course now we’re searching for that D-point. And the D-point likely to be closer towards the 0.8560-level, where that .886 fib sits.
So, definitely something there that you’ll want to take note of here on the NZDUSD Daily Chart. The closer we get to that pink-shaded area, I would expect resistance and the possibility of reversal for this pair to go back down. Now, if you’re looking to buy towards that resistance, sitting on top of our current support, which is this green-shaded area, becomes an opportunity. As long as we stay above the red trend line and above that green-shaded area, I believe there’s potential for buying towards that .886 fib and towards the 0.8560-level. That’s about 90 to 100 pips higher into that pink zone from the green zone.
So, for my expectation today, you follow that green-shaded area backwards in time; you could see historical resistance – left-hand side of the chart. So, those resistance also give us an indication of where potential support is. We also – same fib from the previous down trend – see that the .786 fib sits right there at 0.8461. That’s the top of that green-shaded area. So, a lot of information mounting that this green-shaded area will be potential support along that red trend line. So, buying above that green-shaded area and above that red trend line to target back to the pink zone is a possibility.
The only thing that will change that perspective is if it breaks down underneath that red trend line. Underneath that green-shaded area today, we likely look for the beginnings of a fall back down for the NZDUSD. Let’s even take this down – one more compression down – to the 4-Hour Chart. Coming down here to the 4-Hour Chart, I’m going to actually look at a couple of other Fibonacci retracement levels. First off, let’s go from the lowest low of the red trend line to the current high. We also see that the .236 fib of that range there sits down here into the blue-shaded area.
So, if we do, indeed, break underneath the green-shaded area today, I would expect that blue-shaded area and the red trend line could also become a potential support point for a bounce back higher today. So, there’s two supports for you today. The green zone. The blue zone. Both of them backed up with Fibonacci of different trend ranges and likely looking for a continuation as it pushes back in towards the 0.8560-level at that pink-shaded area and the .886 fib from the previous trend range. Of course, again, as it reaches that pink-shaded area, you’re looking for resistance for this currency pair. So, if you’ve already bought it, that becomes your profit target.
One more Fibonacci. I’m actually going to add one more, and I’m going to zoom in for this. Zooming it in, I’m actually going to add Fibonacci from the most recent low to the current high. And interesting enough here, that puts the .236 fib at the top of the green-shaded area. That’s where we currently have seen support, so, once again, confirming the top of this green-shaded area as our support into the 0.8450s. Looking for support there and a potential challenge all the way back up into the 0.8560s. And the only thing today that will change that would be a breakdown underneath this green-shaded area and a push back down to the blue zone for the NZDUSD today.
