After two years of trading in a 700 pip range, the NZDUSD finally broke down in late June. Since then the pair has carved several lower highs followed by lower lows.
However, the market structure is starting to look more promising for bulls. I’m by no means ready to turn all out bullish here, but the pattern that materialized at the end of September could trigger a reversal.
Notice how NZDUSD has been moving within a descending channel since June. Of course, to be fair, the pattern below didn’t fully materialize until the September 26 session.
Regardless, buyers are making headway again this week after bouncing from 0.6430 earlier this month. As of this writing, NZDUSD is just 30 pips below descending channel resistance near 0.6620.
A daily close (New York 5 pm EST) above that resistance area near 0.6620 could, at least temporarily, reverse the downtrend that began in April. Key resistance above 0.6620 comes in at 0.6700 followed by 0.6850.
Alternatively, a failure to close above the channel ceiling would keep the downtrend intact. It would also keep pressure on the 0.6520 level which is now serving as support.
I’m in no hurry to buy the NZDUSD, but I will be keeping a close eye on what happens later this week. A close above channel resistance would have every chance of triggering an 80 pip rally to 0.6700 or a 230 pip move to 0.6850.