The NZDUSD could be on the verge of a break higher.
The pair has been trending higher since March 2020 and looks determined to continue in 2021.
Many of you will remember the market’s July 2020 breakout.
After closing below wedge support last March, the pair closed back inside the monthly pattern above in June.
It then closed above wedge resistance in July.
The NZDUSD gained over 500 pips following that July breakout.
However, the market is experiencing some consolidation as of this post.
Since reaching 0.7315, the New Zealand dollar has stalled against the greenback.
And that isn’t surprising.
Notice how far the price is above the 10 and 20 EMAs in the monthly chart above.
That suggests NZDUSD is overextended.
Any pullbacks from here are simply a reversion to the mean, or average price, in my opinion.
How far NZDUSD needs to pullback before its next leg higher is yet to be seen.
That said, the 4-hour time frame is starting to look interesting.
If buyers can clear the 0.7220 resistance area, we could see the pair move back to the region just above 0.7300.
Alternatively, a break below 0.7100 would delay the bullish outlook and send NZDUSD back to 0.7000.