A few days ago I mentioned that the NZDUSD eight-day rally might have exhausted its resources. Shortly after that post the pair lost 80 pips and traded down toward the 0.6960 support area before rebounding higher on Wednesday.
Yesterday’s volatile and unprecedented session gave way to 0.6960 once more. However, by the end of the day, the pair was trading at 0.7042.
This back and forth price action indicates a level of indecision that is not conducive to trading the larger swings, which is what we’re all about here.
However, a look at the daily chart sheds some light on the situation, allowing us to position ourselves accordingly or even stay on the sidelines, which is often preferable.
The former double top from April and May at 0.7053 continues to act as resistance on a daily closing basis, which has been the case since Tuesday’s session when the pair fell below the level.
Now, let me clarify by saying that this does not mean the pair will weaken further from here. A close back above 0.7053 could easily re-challenge channel resistance that extends from the October 2015 high.
This would actually be preferable for those with bearish intentions considering where last year’s February and March lows come into play near 0.7180.
Instead, the clarity of the daily chart offers us a way to take advantage of future moves should something favorable materialize. It also keeps us from getting chopped up in the day-to-day volatility of these markets.
In summary, I’m only interested in shorting NZDUSD as long as the pair remains below channel resistance on a daily closing basis.
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