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The NZDUSD broke a significant support level on October 20. We discussed the breakdown the following Monday as the pair was retesting the former support level as new resistance.
Even Tuesday (October 24) tested the conviction of sellers. But ultimately, the NZDUSD sold off toward our target of 0.6820. In fact, the October 27 session low was 0.6818, just two pips below the May low that we were using as our objective.
Not surprisingly, the pair caught a bid after several days of consolidating above the 0.6820 handle. At the time of this writing, buyers have taken prices back into the 0.6930 region.
So is the downtrend finished?
The answer is an unequivocal no from where I’m sitting. There are never any guarantees in the market, but as long as the New Zealand dollar is carving lower highs and lower lows, I’m going to watch for selling opportunities.
That brings us to the confluence of resistance at 0.6985. It’s one of the more impressive value areas I’ve seen thus far in 2017.
Three levels intersect to form this area. First up is the trend line I mentioned last month. The trend line that extends from the September 2015 low is well worn and helped attract offers on the 23rd and 24th of October.
Next is the horizontal level at 0.6985. While it isn’t as apparent from recent price action, a look at the weekly chart shows how it served as a pivot between April and July of last year. It’s also the 38.2% Fibonacci retracement from the 2015 low to the 2017 high.
Last but not least is the descending channel that spanned the July 27 high at 0.7558 to the October 19 low at 0.7009. It’s more obscure than the other two levels but just as important. The channel floor was broken on October 20 session and should now attract sellers.
It isn’t clear whether or not the NZDUSD will make it as high as 0.6985 next week. If it does, I’ll be on the lookout for a favorable selling opportunity. If it doesn’t, I will wait for a daily close below 0.6820, unless an entry materializes on the 4-hour chart.
A daily close at 5 pm EST below the 0.6820 handle would target the May 2016 low at 0.6675. Alternatively, a daily close back above the 0.6985 resistance area would turn our attention higher. Until that time, I’ll remain bearish the NZDUSD.