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I’m going to begin the day today on the New Zealand Dollar versus the US Dollar [NZDUSD]. Starting here on the Daily Chart, going to take a look at the long-term viewpoint for this currency pair first. Of course, on the left-hand side of the chart, we started an uptrend. We began all the way down here into the 0.7700-level and made a rally as it pushed higher, all the way up to the top of the chart, into the mid 0.8500s.
Well, since then, since capping out into the mid-0.8500s, we’ve gone into a bit of range or a period of congestion or a channel that this pair has been floating around in for several months. We go all the way back into September, where we got into the top of this range. We came up, challenged here into the 0.8400-level, made a dip back down, and created somewhat the supports or the bottom of the range. And then it made a rally higher and then, for the next several weeks, it bounced around between the 0.8400-level and challenging down here towards the 0.8100-level, bouncing around from top to bottom several times.
Well, in the most recent weeks, we have seen the challenge of course down here towards 0.8100 at the bottom. The yellow-shaded area. And a rally all the way back up to the top. So, now we’re challenging back into the resistance at the top of this range or channel. Couple of things that help us identify this. Of course I have the bearish trend line. The red trend line coming from the highest high, connecting with the high here back in January, and we could see recently we’ve challenged that high one more time here into February.
We could see the bottom line representing the supports. Not only do we have the trend line on the top. We follow these horizontal levels backwards in time. I have several shaded areas up here in the resistance. The green-shaded area, the orange, and the blue. And all of them have historically shown some accuracy for being resistance for this currency pair, going, again, all the way back into September. The orange-shaded area kind of being the middle part of that, where the majority of resistance has been seen over the past several months.
And we follow it again back to the right-hand side and we could see today’s market and yesterday’s market now approaching back into the green-shaded area and the orange-shaded area as resistance. Let’s go ahead and zoom it in here on the Daily Chart, and here again there’s that orange-shaded area. The green-shaded area holding as resistance. Blue-shaded area kind of being the cap, the last resistance high before it continues to pressure higher.
So, as long as it stays within or under this orange-shaded area, the red trend line and the green-shaded area, I expect we’re looking for resistance. And the only reason I’ll expect it to continue to pressure higher is if we eventually finally break above 0.8400 and start to make that move back in the direction of the uptrend for the NZDUSD. As long as we stay within or underneath the orange-shaded area, the red trend line, the green-shaded area, I’m looking for clues and possibility of resistance and reversal to go back down.
And a great example of that I talked about in the Trade Room yesterday. If you weren’t in the Trade Room, you might’ve missed this, but for those that were in the Trade Room, a great example that I was looking at yesterday – I’m going to draw this circle shape out here like this. And it’ll be difficult to see because of the coloration, but this circle shape that you see back here. You see the resistance high into the orange-shaded area, a new lower high into the green area right here at the bottom, and then it made its turn back down.
So, you take that example that you could see back here from the orange and the green-shaded area, a new lower high that it created, and let’s add another one in here. Let’s add another circle shape in here. I’ll just draw it out and then I’ll drag it down there. Draw it out like this, and then we’ll drag it here. And you can notice how we’re creating a similar pattern over here on the right-hand side. So, again, my expectation, as long as we stay within or underneath that circle like we did the last time, I’m looking for further evidence of resistance and more likely selling opportunities for a reversal for this currency pair.
Buying right now becomes risky. Risky that it finds resistance just like it has since September of 2013 and goes back down. So, I’m not really looking to buy it right now. The closer it gets to the green zone, the orange-shaded area, more likely it is I’m looking for selling opportunities. The risk in that scenario is that, again, it breaks above 0.8400, 0.8415, above the blue-shaded area that you see there on the chart, the red trend line, and continues to pressure higher.
Let’s go ahead and I’m going to take those circles off because, when I get down to the smaller timeframe, it’s going to be really big. Let’s go ahead and go down to the 4-Hour Chart. And there again we are settled out. Take a look at that green-shaded area at the top of the chart. The current market price for the past several hours. Six 4-hour candles. We’re looking at twenty hours of time. Over twenty hours of time. 24 hours of time, where we can see the market just holding underneath the 0.8335-level and underneath that green-shaded area.
I’ve also taken Fibonacci from the highest high you see on this chart to the current low. And I’m not talking about the low at the bottom left. I’m talking about the low right here into the 0.8240s. Taking from high to low, we find the .618 Fibonacci retracement level at 0.8334. That’s the bottom of that green zone. The .786 of that same range sits right here into the 0.8350s. The .886 of that same downtrend range sits at 0.8375. That’s within the orange-shaded area. So, again, within the orange-shaded area, underneath the orange-shaded area and the green-shaded area, I’m looking for resistance and the possibility of this turning back down from the high point of the longer-term range or channel that we’ve been viewing here.
If we can break down under the purple zone, we’ll target the blue zone. If we can break down under the blue zone, the pink zone, green zone, yellow zone become our potential targets. And again, the risk in this scenario is that eventually, at some point, we may see the breakout above these resistance highs. So, the higher you can get into the green zone, the orange-shaded area becomes your best opportunity. Your lowest risk, highest potential reward. Buying right now not really part of the scenario for the NZDUSD, but more likely today looking for selling opportunities into the mid to upper-0.8300s and the possibility for reversal once again to stay within the longer-term channel pattern that we’ve seen here for the NZDUSD.
