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The Kiwi has been in a downtrend for the better part of a year. From July of 2014 to February of 2015 the pair lost more than 1,600 pips.
Shortly after carving out a multi-year low in February, the pair retested the same .7170 area in March. Since that time the market has rallied for nearly 500 pips in what can only be described as choppy price action.
This places NZDUSD at key trend line resistance that can be traced back to October 21, 2014. Today’s session marks the ninth time this level has been tested since it originated six months ago.
Here is a big picture look at NZDUSD.
This leaves us with two options moving forward. A daily close above the trend line would have us looking for bullish price action on a retest. Alternatively, bearish price action on the daily time frame would leave us looking for a short opportunity.
One thing to note with any bearish price action at current levels is that we would need to see a daily close below .7607. Any bearish price action above this level could result in a false signal. As the chart below illustrates, this area has played a pivotal role over the past four months.
In terms of key levels to keep an eye on, to the upside we have the .7888 level which is the 2015 high. We also have .8034 which represents the October high from 2014.
If a short opportunity presents itself, key support levels come in at .7444 and of course the mutli-year low at .7170.
Summary: Wait for a daily close above trend line resistance and then watch for bullish price action on a retest as new support. Key levels of resistance come in at .7888 and .8034. Alternatively, bearish price action with a close below .7607 would have us looking lower to .7444 and .7170.
