Over the weekend I pointed out a trend line that had developed on the NZDUSD. The level that extends from the December 8, 2017 low served as support between Friday and Monday before breaking down earlier today.
The breakdown wasn’t a surprise given how price action had started to lean on the trend line over the last 48 hours of trade. Moreover, Monday’s rally failed to close above the 0.7315 resistance level that I highlighted in the weekly forecast.
Now, so far this is only a 4-hour break of trend line support. We’ll need to wait until the daily close at 5 pm EST to know whether or not sellers can get the job done on a daily closing basis.
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If they do, I suspect sellers will defend the 0.7270/90 area as new resistance. As I mentioned on Sunday, the next key support comes in at the current February low at 0.7175.
But don’t dismiss the position of the 10 and 20 daily EMAs either. While volatile and trending markets can remain stretched for some time, a reversion to the mean usually presents the most favorable buying or selling opportunities.
A daily close below 0.7175 would open the door to the next support level at 0.7055 followed by 0.6965. Note that the 0.7020/30 area could also attract a bid on the way down.
I will remain bearish the NZDUSD as long as prices remain below former trend line support on a 4-hour closing basis.