Daily Price Action

NZDUSD: A Word of Caution to Sellers


Important: I use New York close charts so that each 24-hour period closes at 5 pm EST.

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Since closing below the 0.7160 area on April 23, the NZDUSD has lost 200 pips. And as I pointed out in the April 26 commentary, it was going to take a daily close below 0.7050/60 to expose the next key support at 0.6960.

The pair reached 0.6960 during yesterday’s session and is catching a slight bid so far today. I wouldn’t call this a turning point, at least not yet, but it is a bounce from a well-defined support level.

At the moment today’s bounce isn’t much of a challenge to sellers. NZDUSD bears are still in control, and there’s no evidence of a change in the controlling party.

However, there is a 4-hour pattern developing that could become a concern for sellers.

If we connect the April 27 high with the highs in early May, we get a short-term descending trend line. If we then join the May 1 low with the lows from the 8th and 9th (which was also a pin bar), we get a lower boundary to the one we just drew.

NZDUSD 4-hour falling wedge

Although difficult to see, this is actually a narrowing pattern, also called a falling wedge. Even if it weren’t narrowing, a descending channel at the bottom of a 450 pip decline would still have bullish implications.

That isn’t to say I’m going to rush out and buy the NZDUSD. At a minimum, it’s going to take a close above the upper trend line on the 4-hour chart above to turn things slightly bullish.

Keep in mind too that we have an RBNZ rate decision today at 5 pm EST.

A study of the last two years of price action suggests that a bounce at current levels shouldn’t surprise anyone. While the pair isn’t quite at its range low, the New Zealand dollar has made a habit of carving these 400 to 600 pip swings.

In summary, shorts should tread carefully here, those interested in selling need to see 0.6960 break down on a daily closing basis, and prospective buyers need an upside break of the 4-hour falling wedge.

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NZDUSD daily time frame

Leave a Comment:

Abraham says

Thanks for updates sir we proudly of u

Isaac says

Thank you..informative

Fabio Ramirez says

Justin, thanks for the heads up. I have been keeping an eye on the NZDUSD and it appears there is a level of support at the .68100 area. Maybe the turn around will come a when price hits that support area

    Justin Bennett says

    You’re welcome. To be clear, I’m not suggesting that the selloff is over. The above is just something to keep an eye on.

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Chris says

I’m willing to put my head on the block and say selling would be suicidal! Thanks Justin

derrick says

i will still follow the herd or bulls until the bears out strong

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