On Friday of last week I pointed out the 0.6985 area on the NZDUSD. It’s a confluence of resistance that’s the result of three different levels.
First up is the trend line I mentioned last month. The trend line that extends from the September 2015 low is well worn and helped attract offers on the 23rd and 24th of October.
Next is the horizontal level at 0.6985. While it isn’t as apparent from recent price action, a look at the weekly chart shows how it served as a pivot between April and July of last year. It’s also the 38.2% Fibonacci retracement from the 2015 low to the 2017 high.
Last but not least is the descending channel that spanned the July 27 high at 0.7558 to the October 19 low at 0.7009. It’s more obscure than the other two levels but just as important. The channel floor was broken on October 20 session and should now attract sellers.
Moments ago the NZDUSD tagged former channel support that extends from the August low. It’s the lowest of the three levels. Additionally, today’s session high (so far) is 0.6980, just five pips below the 0.6985 handle we discussed on Friday.
The question now is whether or not the pair is topping. Is today’s retest of 0.6980 enough or do buyers have other intentions?
It’s difficult to tell without some form of bearish price action. There’s no question that the NZDUSD is technically in a downtrend. The lower lows and lower highs tell us that much.
But whether or not today’s high is the next turning point remains unclear. As such, I’m going to stand aside for now and continue to monitor how the pair responds below the 0.6985 area.
As long as 0.6985 holds as resistance on a daily closing basis, I will remain bearish. Key support comes in at the May and October lows at 0.6820. A daily close below that would expose the May 2016 low at 0.6675.
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