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The NZDUSD is approaching a critical support area at 0.6570.
It’s actually a confluence of support as it’s the intersection of a key horizontal level and a trend line that extends from the March 2019 high.
I discussed that 0.6570 horizontal level when the NZDUSD was breaking out last December.
You may recall the inverse head and shoulders that developed last year.
I made a video about it on October 31st.
We also discussed the reversal pattern as the pair was breaking out on December 2nd of last year.
Given the approximate 230 pip height of that inverse head and shoulders, our objective was near 0.6660.
The NZDUSD reached that level on December 26th.
Fast forward to today, and we can see that the pair has been rotating lower since the start of 2020.
But it hasn’t been the most aggressive pullback.
At the same time, the price action so far this year has been relatively choppy.
This retracement also hasn’t given us anything in the way of a continuation pattern to play.
That leaves me waiting to see what type of price action we get at 0.6570 if any.
A bullish pin bar or engulfing candle would be appealing.
It could also signal the next leg higher for the NZDUSD.
Alternatively, a daily close below the confluence of support at 0.6570 would suggest further weakness.
It would also open the door to the May and June 2019 lows at 0.6490.
To be clear, the NZDUSD could go either way at 0.6570.
Just because I have it labeled as support in the chart below does not mean the pair will move higher from there.
It also doesn’t justify a blind buy at that level, at least not for me.
The way the pair reacts to that 0.6570 region will be the determining factor as to whether the NZDUSD is a buy or a sell.