Daily Price Action
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NZDUSD Drops Below Key Support – Awaiting Confirmation

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On Friday I mentioned a potential head and shoulders pattern that’s been forming on the NZDUSD since June. At the time, the pair was trading at 0.7313 and was far from confirming the 340 pip reversal pattern.

Fast forward to today, and we can see that the pair is trading below the neckline at 0.7240 on an intraday basis. It didn’t take long for sellers to sniff out the fact that buyers were beginning to run out of resources.

The question is whether or not the right shoulder took long enough to form. In other words, can we even call this a head and shoulders pattern?

Technically, it fits the requirements. The head is considerably higher than both shoulders and although the right shoulder isn’t as pronounced, the two do occupy the same horizontal plane. Even the neckline is sloping upward which is what we want to see.

I would have rather seen the right shoulder take a bit more time to develop, but overall the structure still fits the criteria.

However, there is one outstanding requirement – a daily close (5 pm EST) below neckline support at 0.7240. That would confirm the reversal formation and set up an opportunity to get short.

For those worried about missing out, keep in mind that the 10 and 20 EMAs are lagging above today’s price by nearly 100 pips. As such, there’s a good chance the pair will retest former neckline support as new resistance. But first, we need the daily close below the level.

The measured objective for the pattern is 0.6880. This area has been a key factor since October of 2015, so it makes sense to use it as a final target. Keep in mind that the pair could also encounter buying pressure near 0.7100 on the way down.

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NZDUSD head and shoulders

Leave a Comment:

12 comments
Ali raza says

Nice

Reply
Roy Peters says

You are right. I’d rather wait for a retest of that neckline before going short.
Patience is key as always. Great analysis justin.

Reply
    Justin Bennett says

    Thanks, Roy. You’re right – waiting for the close and retest is usually the best approach, particularly in these conditions.

    Reply
Langalethu Mthembu says

Your content and perspective are unrivalled in the forex business! Blessings Justin!!

Reply
    Justin Bennett says

    Cheers, Langalethu. Always glad to help.

    Reply
Yousef says

I do not know what is the daily close (5 pm EST)? Could you please explain it?

Reply
Faez says

And now the pair already retest the resistance. Thanks Justin for great article

Reply
shaheenzaman says

I want to know about short/long in trade.

Reply
Jasm says

Thanks for the help. So, it is been confirmed . or shall we wait further to break .72111.

Reply
Darius says

I am worried that it goes up for too long, today tests neckline again, and even EMA 20 is going up. Is this still a short position?

Reply
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