On October 17, I wrote about a potential NZDUSD bottom.
I also included a video in that post where I pointed out a trend line from the 2000 and 2001 lows as well as a falling wedge that dates back to 2016.
The idea was that the confluence of support around 0.6200 and subsequent bounce might indicate a short-term bottom for the pair.
At the time, we were watching for a close above 0.6360 to expose 0.6430.
We got that move the very next day. The NZDUSD closed above the channel top near 0.6360 and tagged the 0.6430 resistance area.
Notice too that the pair carved a bearish pin bar on Tuesday.
That candlestick pattern at key resistance hinted at a pullback, which started to materialize on Thursday.
The question now is, will NZDUSD catch a bid at the confluence of support at 0.6340/50?
While nobody knows what will happen, we can establish what’s likely given the recent price action.
First, NZDUSD did carve its first higher low on October 16, albeit a minor one.
Second, that confluence of support at 0.6200 is incredibly significant, especially the twenty-year trend line.
And third, the NZDUSD did break out of what could be a descending channel, also known as a downward sloping flag pattern.
But we won’t have more answers until the pair tests the 0.6340/50 area.
How NZDUSD responds to that support region will be critical for the continuation of this latest rally.
If we see bullish price action such as a pin bar or engulfing candle from 0.6340/50, the chances are good that we’ll see another run at 0.6430.
A close above that would expose the next key resistance at 0.6490.
On the other hand, a daily close below 0.6340 would likely negate the bullish potential and also expose the lows near 0.6250.
It’s essential to keep an open mind in cases like this.
I will anticipate a reaction at 0.6340/50, but it’s up to the market to decide where NZDUSD will go next, not me.