The New Zealand dollar has looked strong against the greenback in recent weeks. Since the May 5th low at 0.6817, the NZDUSD has gained an impressive 404 pips.
However, a recent development on the 4-hour chart suggests that buyers are becoming fatigued. While it isn’t the most pronounced rising wedge (see the one that formed on the GBPJPY for comparison), there is certainly some tapering occurring with the June 6th high.
This relative weakness is a sign that the pair is beginning to stall to some degree. That doesn’t mean that prices will fall off a cliff if support breaks or that buyers will capitulate tomorrow.
But it does suggest that some form of a reversal is likely over the coming sessions.
Alternatively, if buyers decide to take out today’s intraday high at 0.7226, there is strong resistance just above current prices at 0.7240. This area was a key factor in late January and February of this year.
If 0.7240 should fall, there is the trend line that extends from the September 2016 high. At the current trajectory, that level would come in near 0.7270. But for now, the NZDUSD bulls have plenty to cope with while below the 0.7240 handle.
This idea may seem counter-trend at first glance. But if you look at the price action since September of last year you’ll notice that the NZDUSD has made a habit of carving out lower highs and lower lows.
And if you look at the price action since the July 2014 selloff, well, there’s no denying which way that trend points.
For now, though, I’m just watching to see what happens here. As long as the pair trades above wedge support on a 4-hour closing basis, I’ll remain on the sideline. Only a close below it would prompt me to begin watching for a selling opportunity.
Below wedge support, the next level of interest comes in at 0.7125 followed by 0.7055. Be sure to keep an eye on the trend line that extends from the 2015 low (blue level) as things unfold. It’s sure to become a factor again as it did on May 11th/12th.
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