Around this time last month I commented on the 4-hour ascending channel that has been forming on the NZDCAD since the May low at 0.8692. We were looking for a close below channel support to signal a change in direction. However, that break never materialized which kept us on the sidelines.
Here’s how the pattern looks today:
We now have another set of bearish signals including the daily bearish pin bar on September 20th and a weekly bearish engulfing candle that’s in the process of forming. All of this comes after the pair failed to breach the 2014 high at 0.9655 on a daily closing basis.
But just like in August, we need to see the 4-hour ascending channel break down to signal that sentiment is likely to reverse course.
The fact that the NZD cross has managed to rally another 230 pips since my last commentary is beneficial for those waiting to take advantage of any weakness. What would have resulted in a 200 pip move toward the 0.9090 support level is now a solid 400 pips.
Of course, it was also a welcome sight if you were long the NZDCAD during this period.
From here traders can watch for a close below ascending channel support near the 0.9530 area. Whether that’s a 4-hour or a daily close is entirely up to you as it depends on how you’ve structured this particular trading strategy.
A continued move lower is likely to encounter support at 0.9380 followed by 0.9090, which is also the 61.8% Fibonacci retracement when measuring from the bottom of the channel at 0.8692 to the multi-year high at 0.9734.
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