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I’m going to begin the day today on the New Zealand Dollar versus the US Dollar [NZDUSD]. Starting all the way out here on the Weekly Chart, we’ve been studying this for the past three or four weeks actually. These blue boxes. I know there’s a lot of clutter on the chart and kind of hard to see where the current market price is, but believe me we’ll get down to the smaller compressions. It’ll be much easier to see.
The main thing I want you to see here from this Weekly Chart are those two blue boxes. Left-hand side. It was a timeframe between May of 2013 and September of 2013. The market bounced around inside that blue box. Let’s measure it. That’s about four hundred pips or so from top to bottom, where it just bounced around for a several-month period between there, finding support, resistance, top and bottom, and even in the green and orange-shaded areas in the middle of that blue box on the left-hand side.
So, we take that information and we bring it over here to the right-hand side and we’re in that same zone of support and resistance. And similarly, the red boxes that are in the middle of these areas. If you take a look at the red boxes – one, two, three, four. About a month. Four weeks. About a month worth of time bouncing around in the red box inside the bigger blue box. Well, you go back over here to the right and you see a three-week period so far that has bounced around inside the red box.
So, look at the similarities between the two and that will help us devise a trading plan for the current market price. So, that’s the reason I wanted you to see this larger time compression or timeframe here for the NZDUSD. Now let’s take that information down to the Daily Chart and we can begin finding more intraday opportunities. Of course the blue trend line, the bearish blue trend line coming down from the top of the chart shows us that we have been clearly in a downtrend here for the NZDUSD. There’s no doubt in anybody’s mind. It’s been in a downtrend and it’s been moving lower, all the way down into the 0.7700-level, bottom of the blue box.
The past several weeks though, a couple of weeks I guess I should say it’s been moving in an upward fashion within the red box here. We found support in the blue zone, support in the green zone. Now we’re finding resistance into the orange zone. It’s my expectation that as long as it stays underneath that orange-shaded area, and we’re looking somewhere right around the 0.7950, 0.7960-level. As long as it stays underneath the blue trend line, the orange-shaded area, we’re looking for resistance and for this to go back down, potentially down to the green zone or maybe even the lowest low into the blue-shaded area.
The only reason to expect it will continue to go higher, this has really been the expectation for the past two days and now today being the third day, is that if it breaks the blue trend line, the orange-shaded area, we’ll look for it to continue towards the pink-shaded area, which is all the way up towards the 0.8100-level. So, we’re at a critical decision point here for this pair. Do we go back down in the direction of the downtrend or do we breakout and start going back up here for the NZDUSD on the Daily Chart?
First off, before we go down to the 4-Hour Chart, we could see the Forex Black Book trend bar is red, so that gives us a bearish expectation. So, we have a red trend bar. We’re into resistance. We’re into the blue trend line. All of that pointing to us that there’s a potential resistance and reversal point to go back down. One last thing. Fibonacci from the highest high on the chart, down to the lowest low. Taking Fibonacci of the last downtrend, from the highest high, down to the lowest low puts the .236 Fibonacci retracement level right at the top of the orange zone. You could see it right here on the right-hand side of the chart. There’s your .236 fib right at 0.7900. Well, it’s kind of hard to see that price. Isn’t it? Let me see if I can select this blue-shaded area or the blue box and move it. 0.7972 is that .236 fib right there just above our orange-shaded area. So, there’s another clue or piece of evidence to resistance here into the trend line.
Let’s take it on down to the 4-Hour Chart. Now, you have to be a little bit careful, and we talked about this in the Trade Room yesterday, that we did see an open and close on the 4-Hour Chart. You see a couple of candles here, and it was a false breakout, but remember it didn’t open and close on the Daily Chart. Let me just go back over there. No open and close on the Daily above the orange zone. You go back to the 4-Hour. It is on the 4-Hour. So, just be cautious there. That could be just a false breakout and we could be looking for reversal.
So, it’s my expectation today that as long as it stays underneath here, we have a minimal risk opportunity. The risk is of course above these last highs here. We’re looking somewhere around. Let’s see if I can get this selected. The high of that is 0.7996. So, just underneath the 0.8000-level. We’re looking at risk somewhere around 0.8000. 0.8010 for a stop loss. Your entries are somewhere right here, right around 0.7950, 0.7955, the top of the orange zone, and then you’re looking for it to begin working its way back down.
If you did that during the Trade Room yesterday, there was this little hop down that it took. If you sold up here into the top of the orange zone, you took a hop down here. It went down about 79 pips or so as it pushes back down into the gray zone between the orange and green-shaded area. So, a nice profit seen if you sold it from the top of the orange zone from the Trade Room yesterday. Once again, same scenario. As long as it stays underneath here, that’s the best opportunity to sell this because we’ve seen lots of indications of resistance here. If it breaks above and specifically on the Daily Chart, so we’ll have to wait for the end of day today to know what’s going to happen, but if it breaks above here, we’ll look for it to go back up towards the pink-shaded area at the top of the chart. And then of course if it does go down, our target is the green-shaded area all the way down here at the bottom.
So, we know what our risk is. We know what the potential reward is. If you sell it, you target the green zone. If you buy it on the breakout above the orange zone, you target the pink zone. That’s clear here on the NZDUSD today and it gives us some opportunities to buy or sell, but preferably at this point, selling in the direction of the trend for the NZDUSD today.
