After ten months of carving out an ascending channel, the NZDUSD (finally) broke support during yesterday’s session. This comes just days after its counterpart, the AUDUSD, cracked the trend line that extends from its 2016 low.
This breakdown is something we’ve been anticipating for several weeks now. It could also signal that the pair is readying to give back a portion of its 2016 gains.
However, there is one level that stands in the way of an outright selloff.
The head and shoulders pattern that I first mentioned on November 2nd has yet to confirm. And the neckline of that structure is just 20 pips below current prices.
Following yesterday’s move, the pair finds itself trapped between former channel support (new resistance) and the neckline from the July low at 0.6950.
How you decide to play this if at all is entirely up to you. But considering that the measured objective of the reversal pattern suggests a significant 480 pip move, there’s no rush to get in.
In my opinion, it’s better to have a confirmed reversal and clear path lower than to sell into support to try to squeeze out an extra 20 pips of profit.
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