Daily Price Action
Shares

NZDUSD: 3 Reasons to Be Bearish Following Yesterday’s Close

Shares

On Tuesday I mentioned how the NZDUSD November breakout hinged on the upcoming Fed rate decision. The validity of the November 15th break of ten-month trend line support was being put to the test with a series of higher highs and higher lows.

But Yellen and crew didn’t disappoint. Not only did the pair close (back) below the trend line, but it also carved out a bearish engulfing candle during yesterday’s session.

One thing I pointed out in Monday’s commentary was that a daily close back above this trend line wouldn’t necessarily negate the bearish bias. The surplus of false breaks in 2016 meant that one more wouldn’t be much of a surprise.

Interestingly enough, Monday’s session appears to have done just that. Buyers closed the day above the multi-month level only to fall back below it following yesterday’s FOMC.

If we add that to the list, we have three factors that favor sellers going forward. They are:

  1. Yesterday’s bearish engulfing day
  2. False break above multi-month trend line
  3. Close below 4-hour channel support (see chart below)

From here traders can watch for a retest of the 0.7180 area as new resistance. A confluence of support resides at 0.6970. A close below that would expose the next level of support at 0.6840.

If such a retest doesn’t materialize, it may be best to stay on the sidelines. At current levels, you would need a 150 pip stop, which is unfavorable given that key support is just 120 pips away.

Want to see how we are trading this setup? Click here to get lifetime access.

NZDUSD key technical break

Leave a Comment: