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NZDUSD Clears First Hurdle but Key Test Remains

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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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NZDUSD head and shoulders reversal

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5 comments
Waqas says

Good analysis Justin.. We have 200 DMA at 7022 coming up, how much weight do you give to 200 DMA? I have seen prices bouncing back many times from 200 DMA and prices breaking through 200 DMA very hardly

Reply
    Pawan says

    We will sure see buyers coming in at 200MA

    Reply
    Justin Bennett says

    None. I don’t use moving averages like that.

    Reply
Monty says

I see it the NZDUSD broke through the key brake like you predicted.

Reply
    Justin Bennett says

    Monty, it looks that way, but the neckline is still intact on a daily closing basis.

    Reply
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