NZDUSD buyers are struggling to confirm the idea I mentioned last Thursday.
Last week I commented on the potential for a 200 pip rally from the New Zealand dollar. I even made a video about it on Thursday.
However, a key component of the potential inverse head and shoulders pattern was, and still is, a daily close above the neckline.
At the moment, that level comes in at 0.6430.
You may remember that 0.6430 was also our first target following the October 18 bullish breakout.
I discussed the significance of this confluence of resistance in Saturday’s Forex forecast video.
Be sure to watch it here if you haven’t already.
So far this week, the 0.6430 confluence area is having its way with the NZDUSD.
Notice how Monday’s session spiked above it early, but buyers weren’t able to follow through.
This type of price action is why I favor trading from the daily time frame using New York close charts.
The idea is quite simple…
Until we see a daily close above the 0.6430 area, the NZDUSD is susceptible to selling pressure.
I also can’t fully support the idea of a higher NZDUSD while 0.6430 resistance is intact.
If today’s session finishes as a bearish pin bar, it would suggest that we could see another rotation lower, perhaps back to 0.6350 support.
But that doesn’t mean I’m selling NZDUSD just yet.
First off, we still have several hours left in the session, so anything can happen.
And second, any price action signal between 0.6350 and 0.6430 is pure consolidation, which means NZDUSD lacks conviction.
That isn’t something I want to trade.
I do, however, want to trade an eventual close above 0.6430, if it happens.
Such a break would expose 0.6490 followed by 0.6580.
Alternatively, a push lower this week would likely encounter buyers around the 0.6350 support area.
I’m also not ruling out the possibility of a rotation lower before the next leg higher materializes; maybe even below 0.6350.
That’s something I mentioned in last week’s NZDUSD video.
Keep in mind that New Zealand reports their employment situation on November 5 at 4:45 pm EST, so expect an increase in volatility into Tuesday’s close.