The New Zealand dollar could be setting up for a 130-pip drop from current levels.
In today’s video, we’ll discuss a potential breakdown that would expose the NZDUSD December low.
I’ll also provide an update on the US Dollar Index (DXY).
Watch the video below and scroll down for the annotated charts and analysis.
NZDUSD ended 2023 on a bullish push above the February trend line.
However, the January 2nd candle closed back below that trend line, signaling a fakeout, or a failed breakout, as some call it.
I mentioned this setup to traders in our VIP trading group as it was unfolding.
So far, NZDUSD is down 80 pips after retesting that failed level several times earlier this month.
However, the pair may offer a second-chance opportunity for those who missed the initial retest.
A sustained break below 0.6210 this week would flip the level to resistance.
That would confirm a larger fakeout from the New Zealand dollar above that handle.
As many of you know, fakeouts like this are my favorite way to trade the Forex market.
They’re high-probability setups that usually offer favorable risk-to-reward ratios.
If NZDUSD can hold below 0.6210 this week, a retest of the 0.6050 region seems likely.
The pair came close to retesting it as new support in December, but it never quite got there.
That leads me to believe there’s considerable sell-side liquidity below the December low.
One critical piece to this setup is that NZDUSD needs to close today below 0.6210; with seven hours left, anything can happen.
Alternatively, a close back above 0.6210 would keep the area intact as support.
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