While NZDUSD remains relatively well supported at the moment, that may not last for much longer.
Why do I think so?
There are a few reasons beginning with this week’s failure to push above the current 2016 high at 0.7053. The pair recently ran into channel resistance that extends from the October 2015 high. This particular ascending channel has been in place since the 2015 low and formed after the pair lost 1,500 pips between May and August of last year.
Within the structure above we have a smaller pattern that has emerged. This second ascending channel, which has also formed against the grain, gives credence to the idea that the pair may weaken further over the coming sessions.
Last but not least is something on the 4-hour time frame that recently caught my attention. I don’t often trade technical patterns that form on the intraday charts, especially double tops/bottoms. However, when the levels involved line up with other areas I’ve had my eye on, it’s often a good idea to pay attention.
The combination of swing highs from April and May give us a double top that could trigger a 245-pip selloff. Of course, the pair first needs to close below neckline support at 0.6806 before we can call this a tradable structure.
It just so happens that the neckline of the pattern intersects with the second channel above. What’s more, the 245-pip measured objective comes in at 0.6560, just ten pips above our key support level at 0.6550. This area was carved out by several swing highs and lows between January and February of this year.
We’ll see what next week brings, but I certainly won’t be interested in buying NZDUSD on the next retest of the 0.6800 handle.
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