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Is the NZDUSD ready to move higher?
How about 200 pips higher or more?
Watch the video below to find out what I think.
Be sure to also scroll down for more commentary and an annotated chart.
The NZDUSD has played out perfectly so far this week.
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But before we get to this latest rally from support, I want to point out my first mention of the downward sloping flag here.
If you watched my October 17 NZDUSD video, you know we were waiting for a break above the confluence of resistance at 0.6360.
I even mentioned that a bottom might be in for NZDUSD.
The pair cleared that area the very next session and even retested the first key resistance level at 0.6430.
We also saw a bearish pin bar develop on the 22nd from 0.6430.
Then just before last weekend on October 24, I told readers of this site to “keep an eye on 0.6350”.
The intersection of a key horizontal level and the descending channel top had created a confluence of support at 0.6350.
Notice where NZDUSD bounced this week.
The pair never did close below that support area, which meant it was always intact as new support.
And once more, we can see how NZDUSD buyers are testing 0.6430 resistance.
So where to from here?
First, that 0.6430 area is still serving as resistance.
We even saw how sellers rejected the overnight advance from the NZDUSD.
However, buyers aren’t backing down, which indicates strength.
Second, I have to respect the potential for further gains as long as 0.6350 support is holding.
The recent higher lows are also something to keep an eye on.
Third, and perhaps most important, is the potential for an inverse head and shoulders pattern based on the price action since August.
I will admit that the right shoulder is a little shallow, but this NZDUSD structure does still qualify as a bullish reversal, in my opinion.
Watch the video above to see why I think so.
Given the 240 pip height of the pattern, a move up to 0.6580 or even 0.6630 is well within reach.
The latter is the top of a falling wedge that I pointed out in the October 17 video.
But NZDUSD bulls need to secure a daily close above 0.6430 first.
Remember that I use New York close charts so that each 24-hour session opens and closes at 5 pm EST.
Until that occurs, the pair could remain under pressure.
If we do get a close above 0.6430, I will keep a close eye on the 0.6490 and 0.6580 resistance areas.
Alternatively, a close below 0.6350 would negate or at least delay the bullish outlook for the NZDUSD.