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NZDUSD Breaks Key Support, Targets 0.6820

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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.

NZDUSD trend line support on the daily chart

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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NZDUSD breakdown from key support level

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14 comments
Tims says

Thanks for the heads up Justin.

Reply
    Justin Bennett says

    You’re welcome.

    Reply
John says

Thanks again Justin for the analysis and I also would like to know if it is advisable to put sell limit pending orders at the levels of the 10 and 20 EMAs respectively on the daily chart now?. Thanks

Reply
    Justin Bennett says

    Anytime, John. I can’t answer that for you as it depends on how you trade (what’s in your plan?).

    What I can say is that it isn’t something I would do.

    Reply
Darius says

I would like to have shorted when closed below 0.70500. But there was no even retest. Sometimes we miss profit when waiting for confirmations.

Now bad thing is that we are so far from moving average and trendline goes up. So even when we short at trendline resistance, the resisitance will be going higher.

Reply
Darius says

Btw what do you mean by “Bearish price action” – bearish pinbar or something more? I often see this phrase but do not completely understand

Reply
    Darius says

    And also if we wait for bearish pinbad to form, its upper wick might be at our sell price but close price then will be much lower and we again get worse setup because of waiting.

    Reply
      Justin Bennett says

      Not sure what you’re referring to here, but yes, I mean a pin bar or rejection candle.

      Reply
Farai says

Thanks Justin

Reply
Wendy says

it is going to be strong sell based on monthly retract creating wave c1 it was on wave b

Reply
Gulzar Zubairy says

Sir are you still think that price will come down till 0.6820?

Reply
    Justin Bennett says

    I see no reason to change that view as of now.

    Reply
Phuc lee says

Thanks Justin! ♡♡♡

Reply
Adrian says

Hi there, NZDUSD seems to have risen until 0.69290. Is the downtrend still intact or is this a reversal and a sign of move higher?

Reply
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