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NZDUSD: Things Could Get Ugly if This Level Fails

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Over the weekend I mentioned how the NZDUSD was likely gearing up for another run at ten-month channel support. I also commented on how last week’s close was marginally above the 0.7160 area, leaving some doubt as to how the pair would kick off the new week.

While the pair is still treading water 50 pips above ascending channel support, what is now clear is that 0.7160 should indeed act as resistance going forward.

But instead of simply rehashing what I covered just covered 24 hours ago, we’re going to deep dive into what the bigger picture holds for the NZDUSD. And while I believe the ten-month ascending channel (third chart) to have bearish implications, there’s a much broader structure at play that casts a bearish shadow over everything.

To get an idea of what I’m referring to we have to move all the way out to a monthly chart.

nzdusd-monthly-channel

It’s been quite some time since I’ve shown the monthly channel above. Clearly, it still reigns over everything buyers and sellers have done and will continue to do for the next several months and even years.

If you have wondered why I’ve been so critical of the NZDUSD – even as the pair gained more than 1,000 pips in 2016 – the chart above explains my reasoning perfectly.

But let’s not forget about the daily ascending channel that extends from the current 2016 low at 0.6346. Although it’s technically an uptrend, the implications for such a pattern amidst a two-year downtrend are bearish in the medium to long-term.

And if we treat the range between April and August of 2015 as a flag pole for the structure, we get a measurement of 1,550 pips. This is the same distance from the current 2016 high to the confluence of support at 0.5928 that I mentioned above.

nzdusd-weekly

This is either pure coincidence, or it’s a sign of trouble ahead. And I haven’t even mentioned the confluence that surfaces if we use the 2014 high as the starting point for the flag pole. More on that in a future post, although I suspect many of you will know what I’m referring to once you do the math.

Like all of the commentary I release, the final decision is yours as to whether you believe this is cause for concern or not.

As for me, I’m certainly not going to ignore a red flag, especially after witnessing such “coincidences” play out in epic fashion over the last two years. The GBPJPY, NZDJPY, and even USDJPY come to mind.

I remain short from the 0.7200 area and will look to add to the position should the pair weaken further below channel support near 0.7070/80.

Want to see how we are trading this setup? Click here to get lifetime access.

nzdusd-daily-chart

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4 comments
Pawan says

Great analysis Justin, What are those MA values you using buddy?

Reply
    Justin Bennett says

    Thanks, Pawan. I use the 10 and 20 EMAs.

    Reply
Carol Capner says

That analysis was epic. Well done Jason. I would love to stretch my analytic skill thinking and problem solving as good as what you have just done. maybe with practice I may start chipping away and find Improvement until I hit Bingo…

Reply
    Justin Bennett says

    Carol, I’m pleased you enjoyed it. If you have the passion for it and put in the time, it will eventually become second nature. You’ll start to see things like this materialize with almost no effort on your part. Let me know if you have any questions.

    Reply
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