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I’m going to begin the day today on the New Zealand Dollar versus the US Dollar [NZUDSD]. Before I begin today’s analysis, it’s important for us to realize that we have a bank holiday in both Canada and the US today, so we may experience some lighter trading volumes and lower liquidity today in the market. So, you want to pay attention to that if you’re going to be entering the market today, which means we may see some very muted market movement across many currency pairs.
I’m going to start here on the NZDUSD because if you look at the news calendar today, this is the only real currency pair that we have any major data or information from over the next 12 hours or so, out of New Zealand, so it’s important for us to keep that in mind as we go through this currency pair. We’re starting here on the Weekly Chart. We can see that over the past several months, we’ve been studying these two blue boxes here on the chart.
We’ll start with the left blue box. It was a several month period here. We went between May of 2013 and September of 2013, where we kind of bounced around inside this blue box on the left. Now, that’s a wide area. We’re looking at it from top to bottom, about four hundred pips. A little bit more than four hundred pips, top to bottom of that left-hand blue box. So, it’s important for us to know that, but it’s also important for us to see that. Historically we see support above the blue and the green-shaded area, resistance as we approach the orange and the pink-shaded area towards the top of the blue box.
Currently, if you follow it over to the right-hand side of the chart, we can see we’re in a very similar price zone. The same blue box duplicating the resistance into the pink zone. The support into the blue-shaded area. We have clearly been in a downtrend over the past several months. We started all the way up here at the top of the chart, into the 0.8800s, back in July and it’s been a traumatic downturn as it pushed all the way from up there into the 0.8800s, down here towards the 0.7700-level.
Clearly 0.7700 is the barrier that’s holding this from going lower right now. 0.7700 has been capping the support here, and that even goes back to 2013. This time between May and September of 2013, we see that same support above 0.7700. So, it’s easy to say that as long as it stays above 0.7700, we’re looking for support. If it ever breaks out underneath 0.7700, then we’ll look for that continuation lower. So, really what we’re looking for right now is a breakout. We’re looking for that breakout lower or below support or breakout higher, above resistance and what could be that red trend line that we’re looking at there on the Weekly Chart.
Let’s take all that information down to the Daily Chart. There’s our red trend line coming down from the top. There’s our current blue box. There’s the 0.7700-level at the very bottom. We can see. Just count today. Seven days so far. The past week has found support above that 0.7700-level, giving us a real good sense of where our baseline is for the NZDUSD. Again, you can go back several weeks ago and see that same support. So, clearly, as long as it stays above there, we’re looking for potential buying opportunities. Buy on support. Look for rallies higher. Protect profit and you’re looking for further clues and evidence of reversal.
Now, again, I will say that the trend is down. We have no evidence of trend change here. The downtrend. Lower highs and lower lows. Do we see higher highs and higher lows? No, we don’t see any evidence yet of trend change. We have potential trend change, but no actual trend change here, coming from the 0.7700-level. So, keep that in mind as you’re looking to evaluate your risk to reward here for this currency pair. Is it worth risking the buy against the overall downtrend? Is it worth risking your account if it does continue to go in the direction of the trend?
So, keep that in mind, but I think it’s a fairly minimal risk opportunity down here, as close as possible to 0.7700. Your first target is the green-shaded area and that would be the 0.7785 to 0.7800-level, so there is a pretty decent amount of profit to be made if you buy close to 0.7700 and you shoot back into the upper-0.7700s, towards 0.7800. So, a decent amount of profit could be capitalized on protected, and if it continues to pressure higher, then you look for further profit as it breaks out and changes the direction of the trend.
As I said a few minutes ago, we’re really looking for a breakout. Yes, we could trade between the green and the blue zone over the past seven days. That’s been a profitable scenario. Eventually we will see a breakout above that red trend line, green-shaded area, or below the blue-shaded area and the 0.7700-level. Those four arrows right there, the blue and the green zone, are really what we’re going to be looking for over the next several hours or even couple of days here for the NZDUSD.
Take it on down to the 4-Hour Chart. As we get down here, doesn’t really change it. We do see a little bit of a false breakout here on the 4-Hour Chart. And what I mean by that is we see the market clearly got underneath 0.7700 here on the 4-Hour Chart. Take a look. Four four-hour candles sat underneath the 0.7700-level and eventually turned right back above it and went back into the 0.7800-level.
So, what I talk about in my Trade Room on a daily basis is clearly watching for daily breakouts will give you a better confidence in the breakout. So, if you go back to the Daily, keep that in mind where it got underneath it. You go back to the Daily. You see that it was just a temporary push. No open and close on the Daily Chart. So, clearly that’s going to give us more confidence in the breakout if we see it on the Daily Chart.
Back to the 4-Hour. If you’re looking for intraday trading opportunities, of course as I mentioned, there is some New Zealand news later on today out of New Zealand. For this currency pair especially, we’ll watch for either support here into the 0.7700-level, a rally back to 0.7785, 0.7800. A breakout above there continues to pressure higher, back towards the 0.7900-level and the yellow-shaded area at the top of the chart.
A breakout underneath 0.7700, especially if we see that open and close on the Daily Chart, we’ll look for further movement lower, possibly all the way back down into the 0.7500s. So, these two areas are your areas to pay attention to. They provide lower risk and higher reward. Your lower risk scenario for buying is into the blue zone as close as possible to 0.7700. You target the green zone or higher. If you’re looking to sell the direction of the trend, that’s good too. Then you’re looking for sells closer to the green-shaded area, 0.7785, 0.7800.
In fact, you could even take a trend line. Let’s just put a trend line along these last two highs. The closer it gets to that trend line would be the better idea for selling the NZDUSD. I have a Fibonacci here on this pair from the highest high way back in time. You can’t even see it here on the 4-Hour Chart – to the lowest low. Not really useful in the current market because the .236 is all the way up at 0.7935. What we will do is take another fib. Let’s take a fib from this high right here that we see after this uptrend and then started the downtrend again. Let’s take Fibonacci of that range there. What’s interesting is we see the .236 now at 0.7747, down here closer to the blue-shaded area. The .382 at 0.7801. That’s into the middle of the green-shaded area.
So, we could see some overlap of fib with our shaded areas here. Green zone specifically as your resistance. Zoom it back in here on the 4-Hour Chart, and there is that range there from the highest high you see here, down to the current low. There’s obviously many multiple ways you can draw a Fibonacci. I could take it from this high, this high, this high, this high. All of those potentially have an opportunity. I still think any way you look at it, you’re looking at resistance, the green zone. Support in the blue zone. That will provide your lowest risk and highest reward opportunities to trade the NZDUSD Today, until we see a breakout for this currency pair.
