NZDUSD has been a very different pair so far in 2016, at least compared to what we saw from 2014 and 2015. And by different, I mean more chop and less trend.
Sure, there were a few periods of choppy price action in the previous two years, but they were broken up by long bouts of trending prices.
Around this time last year, we began to see a change in behavior. Instead of trending for weeks on end, the pair started carving out shorter swings but did so without the clear directional bias we had grown to appreciate.
In essence, buyers don’t look nearly as confident as sellers did in 2014 and 2015.
While that comparison certainly isn’t enough to turn us bearish, the 4-hour rising wedge that’s been developing since late July could spell trouble for longs.
Furthermore, although buyers managed to push prices to new fifteen-month highs recently, they were unable to hold those levels on a daily closing basis. This failure combined with the rising wedge you see below could be an early warning sign that a pullback is in order.
But like any technical pattern, the implications are only valid upon confirmation. In the case of this 4-hour structure, that would involve a close below support.
As for targets, the first on my list is the 0.7110 handle. This level served as resistance on July 28th before flipping to support on August 8th and 9th. A close below this area would expose the two-month support level at 0.6967.
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