I haven’t paid much attention to the NZDUSD since prices topped out in July. Starting in mid-August, the pair entered a period of consolidation and wasn’t offering many directional cues.
However, that changed with the October 19 selloff. That session alone put prices below the key 0.7050 level on a daily closing basis. But the real damage was done once the October 20 session closed.
If we look back to September of 2015, we can see that the NZDUSD has carved a significant trend line.
It was this trend line that assisted with the rebound from 0.6820 in May of this year.
You may be wondering why I didn’t use the August 24, 2015 low as the starting point for my trend line.
I’m ignoring it because of the extreme levels of volatility on that day. Depending on your broker, the August 24 low could be different from what’s on my chart by 50 pips or more.
That means each trend line will intersect with prices at different times depending on your broker. So in a case like this, I look for lows that were carved from less volatility and are therefore not as dependent on one broker’s interpretation.
The NZDUSD appears to have closed last week below this trend line that extends from the September 23, 2015 low.
As evidence that the 0.6990 area will begin to attract sellers, look no further than the 4-hour candle that closed today (Monday) at 5 am EST. The high was 0.6990 and is still holding as the session high as I write this post.
That said, I’m only interested in trading the NZDUSD on the daily time frame. And considering that the current price is still more than 100 pips from the 10 and 20 EMAs, I wouldn’t be surprised if we see some consolidation before the next leg lower.
Bearish price action from the 0.7000 area could present a favorable opportunity to get short. Key support comes in at the May low of 0.6820. Alternatively, a daily close (5 pm EST) back above the trend line near 0.7000 would negate the bearish outlook.
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