On Tuesday, the NZDUSD carved out a bearish pin bar after testing key resistance at 0.7300. This is an area we discussed on Monday before the recent intraday spike up to 0.7343.
Yesterday’s price action is an excellent example of why I favor the daily time frame. The pair’s failure to close above resistance at 0.7300 despite an 80 pip intraday rally is a sign of exhaustion.
The daily signal comes as the pair is trading up against wedge resistance. I posted this chart a couple of weeks ago, but I think it’s worth a repost.
Although Tuesday’s bearish pin bar hints at exhaustion and exposes downside targets, buyers are once again showing resilience. As I write this, the NZDUSD is trading at 0.7298 which is just above trend line resistance at 0.7290.
This brings us to a make-or-break condition for the pin bar in the chart below. Should buyers manage a daily close (5 pm EST) above 0.7290, there’s a good chance of a move higher from current levels. In other words, it would negate any bearish setup.
On the flip side, a daily close back below 0.7290 would keep the bearish scenario alive. It would also feed the potential for a move back to key support at 0.7200.
I’m short from 0.7290. The entry may have been a bit premature, but the viability of the position is contingent on today’s close as mentioned above. It’s also a relatively small position. I will consider adding to it but only if sellers can follow through on yesterday’s bearish signal.
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