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On October 31 I made a video about the potential for a 200 pip rally from the NZDUSD.
The inverse head and shoulders that looked to be forming was one to watch.
You may remember that the pair was also coming off the confluence of support around 0.6200.
That’s the intersection of a twenty-year trend line as well as the bottom of a multi-year falling wedge.
However, the NZDUSD never did close above the neckline.
That was the requirement to turn the pair higher that I mentioned in that October 31 video.
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Not only did buyers fail to clear the 0.6430 resistance area on a daily closing basis, but they also gave up a bearish engulfing pattern on November 4.
The bearish signal hinted at another push lower.
Following a 140 pip selloff from the November 4 high, the NZDUSD popped higher on Wednesday.
Since that time, we’ve seen the pair consolidate right below the neckline at 0.6420/30.
The fact that buyers won’t go away could be a sign of strength.
As such, I would not want to forget about this potential inverse head and shoulders pattern as we head into next week.
Just remember that it’s still going to take a daily close (using New York close charts) above the 0.6420/30 neckline to confirm the reversal.
Such a close would expose 0.6490 with a break there taking on the 0.6580/90 resistance area.
On the other hand, a close below 0.6320 would indicate weakness and could even expose the year-to-date lows at 0.6200.