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Transcript of Video
I’m going to get started today on the New Zealand Dollar versus the US Dollar [NZDUSD]. Starting here on the Weekly Chart, over the past several months, actually going back into 2013, we have seen consistent support just above the 0.7700-level. If you look down at the bottom of the chart, the blue-shaded area, that’s just above the 0.7700-level, going all the way up into the 0.7720s.
Follow it back in time to April, May, and June of 2013, and you could see the consistent support, where the market was in a clear downtrend and over a several-month period found support just into that blue-shaded area at the bottom of the left-hand side blue box. Eventually finding enough support to cause a turnaround, turning back higher, breaking above the blue box and making a new high within the trend.
Now, over the past several months, we have seen a pretty healthy downtrend, as the market fell from all the way up here into the 0.8800s, right back down here towards the 0.7700-level. And over the past few months, we’re going all the way back into September of this year, we have seen support just above the 0.7700-level. So, it’s a key support and I would expect that we’ll likely continue to see support until we see some information that’s strong enough to drive it down through that price level.
If, of course, we see the breakdown of 0.7700, we’ll look for further movement down in the direction of the previous downtrend. But as history shows us, that’s not a guarantee because if it continues to find support here, reversal is a possibility from this price level. Now, if it breaks down through 0.7700 and we squeeze this in a little bit, the next stopping point that I see here on the Weekly Chart would be all the way back down here into the mid to upper-0.7500s. That’s the yellow-shaded area and the red trend line, down at the bottom of the chart.
So, quite a long ways down if we break 0.7700, but of course we have not done that. So, let’s take that information now, now that we know how strong and historical a level 0.7700 is, down to the Daily Chart. Now, again, here’s over the past several months, going back to September of this year. We’ve seen quite a lot of support into this level, so it’d be very discouraging about selling it right now. If you’re looking to sell this currency pair, you’re expecting a breakout. I think probably the first thing you have to do is wait for that breakout before you can expect it to go lower.
Until it sees a clear single candle body open and close underneath 0.7700, I think there’s no guarantees of a breakout. In fact, if you just go back to the last time we were here, we saw one red candle attempt to get down below 0.7700. The next day, opened up and got right back above it. So, beware of the false breakout, like what we saw back here in the middle of this range here. Be careful for that. Wait for the open and close underneath it. That will give you a much higher confidence that it’s going to continue to go down in the direction of the previous downtrend.
Otherwise, on an intraday basis, this does present us an interesting opportunity with fairly minimal risk for support and reversal here for the NZDUSD. So, that’s what I’d be watching for today. If you’re looking for a clear low-risk opportunity that has high potential reward, if you look back in history, down here close to 0.7730, even under that as close as possible to 0.7700 will give you the lowest risk, highest reward possible opportunity for support and reversal for this to turn around and go back up.
Now, that doesn’t mean that’s the only opportunity today. There of course is the opportunity, like I just mentioned a few moments ago, for the breakout. So, if you’re wanting to continue to focus your efforts on the breakout, then you must wait for it to push underneath 0.7700 before you expect it to go lower. So, those two arrows show you the opportunities right around 0.7700 and 0.7730 here for the NZDUSD. And I think there’s one more opportunity that we could look for here for this pair. It’ll be easier to see as we go down to the 4-Hour Chart.
Now, obviously over the past several days and we discussed this in the Trade Room yesterday, there has been quite a bit of congestion around this green-shaded area and the 0.7780, 0.7800-level, the green-shaded area. So, if you’re looking for a new selling opportunity, that historical support now becomes a potential resistance. And we could see that right there. We’ve broken underneath it. Now we’ll look for the market to retest that as resistance.
So, we now know the blue zone is a potential support opportunity. A breakout under the blue zone looks for a continuation of the downtrend. If you’re looking to sell this, sell rallies to resistance, which would be back to the green zone. If you’re looking to buy it, buy dips into support, into the blue zone. Those are your two opportunities here for the day today.
Let’s zoom it out one more time, just to take a quick peek. We do have Fibonacci from the lowest low on the chart that you see down here. The last attempt of the 0.7700-level. The lowest low to the most recent high right here, just this last uptrend leg, and we find the .786 fib at 0.7727. That’s the top of the blue zone. So, we clearly see the blue-shaded area. .886, by the way, is at the bottom of the blue zone. Fibonacci of this last uptrend confirming the blue-shaded area as resistance.
Now, if I was to take Fibonacci from that same high, down to our current low, I suspect we’ll see something here in the range of the green-shaded area. In fact, let’s go ahead and do that. Let me take some of these historical fibs off, so we can clean this up a little bit. So, currently the only fib that you see here on the chart is this little uptrend right here. Let’s also take Fibonacci from that same high, down to the current support low, the newly fresh low. .236 now sits right here at the green-shaded area, confirming that. Let’s take one more. Take a Fibonacci from this high right here, the last high that we see, down to the current low, and that puts the .236 of that short range right there at the bottom of the green zone.
So, clearly if you’re looking to trade this, looking at Fibonacci, looking at historical support, resistance and congestion areas, the blue zone or the green zone provide you with your lowest risk and highest potential reward. I might even bring that down a little bit, but I think I’m going to leave it, the blue-shaded area there, at 0.7730 because of the fibs. You might bring that down a little closer to 0.7720, but either way you look at it, the blue zone is support. If you’re looking to sell it, don’t sell it into the blue zone. Wait for it to either go up to resistance or break under the blue zone. If you’re looking to buy this, buy it as close as possible to 0.7700 to provide you with your lowest amount of risk, and eventually we’ll look for a breakout of the longer-term range for the NZDUSD.
