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NZDUSD: Topping Pattern or Just Consolidation?

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The NZDUSD has been churning higher since the May low at 0.6818. Just when it looked like the rally was tiring on July 11th, the pair went on to gain another 350 pips.

But those gains were short lived as August has so far delivered a loss of 200 pips. With the pair back below the late June highs at 0.7345, the NZDUSD has taken on a shape that could produce a move lower over the coming weeks.

The rally that began in May followed by August’s downturn has formed what could be a head and shoulders pattern. But as long as the pair trades above the neckline support near 0.7240/50, the upward bias cannot and should not be dismissed.

It’s going to take a daily close (5 pm EST) below the neckline to confirm the topping pattern. Such a break would also expose the measured objective near 0.6880.

At first glance, the price action in early May doesn’t appear to have respected the 0.6880 handle. However, if you move out to a weekly chart, you will notice that 0.6880 has been a key factor since October of 2015.

I’ll be keeping a close eye on the NZDUSD next week. A daily close below support near 0.7240/50 could present a favorable opportunity to get short.

Alternatively, a close above 0.7345 would hint at an extended move higher, but as long as the 2017 high stands at 0.7558, the formation in the chart below remains a threat to buyers.

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NZDUSD daily time frame

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6 comments
shaheen zaman says

I want to know about long/short position.

Reply
Bert says

From an Elliot wave perspective, it looks like we have just completed a wave 4(a micro wave or pullback) and are beginning a wave5. A 2 bar set up as we saw 3 & 4 days ago is one of the best
indicators of a breakout of a pullback—especially if the 2nd bar is a bullish engulfing( it’s almost a slam dunk). I’m looking at a daily chart and see the 2 bar setup but if you looked at a 2 day CHART, THIS WOULD BE A BULLISH PIN BAR . If you think about how a pin bar forms, it starts at a certain point(bearish move) rejects that point and then moves bullisly back to its starting point.
A 2 bar set does the same thing, except with 2 candles. In the chart we’re looking at, we have two
2 bar setups so both would be bullish pin bars—a pretty strong indication that the next movement will be to the upside. HOW FAR ?
Elliott wave rule is that wave 3 can NEVER be the shortest IMPULSIVE wave. Since we already see wave 1 (extended) and wave 3 it follows that wave 5 must be shorter than wave 3. Target should be about .7465

Bert

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    Justin Bennett says

    Thanks for commenting, Bert. We’ll see how it plays out.

    Reply
Chris OReilly says

How did you get the measure confirm at .6880?

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Chris OReilly says

I see you said something week the weekly chart and i see the wicks hitting that handle. Measure objective makes me think about fibs or you using trendlines to measure previous swings to potential swings from the last high. I wish i can put to pictures to explain it better.

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