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I’ve been talking about the potential for a lower NZDUSD for weeks.
But despite several bearish signs, the pair has held its ground.
That isn’t too surprising, though, when you consider how correlated the NZDUSD is to indices like the S&P 500.
Everyone knows how the Fed has intervened in US markets of late.
However, when you take a step back and look at the bigger picture for NZDUSD, it’s difficult to anticipate anything other than lower prices.
First, the fifteen-year head and shoulders is unmistakable.
Some have questioned the validity of this pattern because of its scale, but that only adds to my conviction.
I’m more likely to believe a pattern that has taken fifteen years to develop than one that takes fifteen days or even weeks.
Furthermore, 2020 has already proved that anything is possible.
In addition to the head and shoulders, the NZDUSD broke below a twenty-year trend line in March.
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Despite rebounding sharply at the end of March, the market hasn’t shown me anything to make me think it can reclaim the 0.6200 area.
As long as 0.6200 is intact as resistance, the NZDUSD is going to struggle.
And if the pair falls below 0.5980 on a daily closing basis, expect selling pressure to mount and push prices to 0.5860.
A close below that would take on 0.5650 and eventually 0.5470.
Last but not least, note that unless something changes between now and Friday, the NZDUSD is carving a bearish engulfing week near a swing high.