Over the weekend I mentioned the idea that last Thursday’s break of resistance on the NZDUSD appears to have been false. The 0.6970 area had supported the pair since mid-June. But that changed when sellers closed the December 16th session below the level.
After treading water just below 0.6970 toward the end of 2016, buyers managed a close back above the level on Thursday of last week. However, those gains didn’t last long as Friday’s session gave it all back and once again closed the week below the 0.6970 handle.
That’s the backdrop. Now to discuss where we go from here.
If last week’s price action was truly a false break, we need to see confirmation of it. And the only thing that can confirm it is a daily close (today) below 0.6970.
So here’s how I’d approach this…
If today closes below 0.6970, there’s a good chance we’ll see the pair lose additional ground in the coming sessions. The next support area comes in between 0.6840 and 0.6860.
On the other hand, if today closes above the level, we could see a move back toward last week’s high at 0.7042.
There is, however, one other scenario. The fact that the NZDUSD respected 0.6970 on the weekly chart suggests that the level may hold on a weekly closing basis rather than a daily closing basis.
While the daily time frame can produce highly lucrative price signals, the weekly time frame can often do one better. But until the market gives us an actionable setup, staying flat is the best option in my opinion.
In summary, there’s nothing to do at the moment. Only a session close (5 pm EST) below 0.6970 would prompt further consideration. If that doesn’t happen, keep an eye on this week’s closing price along with last week’s high near 0.7040.
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