Without looking beyond horizontal support and resistance levels, NZDUSD looks to be a strong buy at current prices. After gapping down to start the week, the kiwi found a bid at the 0.6870 handle and has since gained 160 pips.
But despite the substantial rally over the past 48 hours, the pair has hit a brick wall at channel resistance, a formation that extends off the current 2016 low. I mentioned this pattern last month, noting that we’d need to see a close above the upper boundary of the channel before considering any buying opportunities.
With this level coming under pressure for the third time since its inception, that break could be just around the corner. However, it’s important that we trade what is happening rather than what we’d like to see happen.
The circumstances bring us to a crossroads where the next few sessions could determine whether to buy the kiwi or stand aside and wait for a sell signal. For those contemplating a long position here, keep in mind that prices are getting dangerously close to the key 0.7170 resistance area.
In summary, I need to see quite a bit more before I’m convinced that this slow-moving ascent is nothing more than consolidation before the next leg down.
