On December 28th, I discussed a potential bearish fakeout from NZDUSD at the 0.6400 handle that suggested weakness.
The idea was to watch for a short opportunity at 0.6400 on a retest.
However, NZDUSD didn’t make it that high as the pair topped out at 0.6370 before rotating lower.
Today, the New Zealand dollar has other plans against the USD.
I’m currently monitoring a potential NZDUSD falling wedge that could come into play next week.
Notice how the pair is getting “squeezed” between support and resistance within the current consolidation.
The price action above looks constructive, especially considering the 1,000-pip rally that started mid-October.
But NZDUSD hasn’t confirmed anything yet.
It will take a close above wedge resistance at 0.6320 to open up higher levels, including the recent 0.6510 high.
There’s also a chance we see a dip into 0.6150 support first while NZDUSD is below trend line resistance.
And don’t forget about the trend line off the mid-October swing low that I mentioned on December 28th.
A rally from the New Zealand dollar later this month could revisit that trend line as resistance, which currently resides near 0.6600.
Also, there’s a chance we could see NZDUSD offer one more dip into 0.6150 later this month, a scenario we must respect while below 0.6320.
Regardless, the recent price action looks appealing with a close above the upper trend line opening the door to 0.6510.
Alternatively, a daily close below 0.6150 would negate the idea.
