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I’m going to begin the day today on the New Zealand Dollar versus the US Dollar [NZDUSD]. Starting out here on the Weekly Chart, a couple things to point out before we go down to the smaller compressions. First off, of course we have been in a downtrend for the past several weeks. We’re starting all the way up here into the 0.8800s, back in July of this year.
Since July, been a steady downtrend as it’s continued to fall from the 0.8800s, all the way back now into the 0.7900s. I want to point out this area into the mid-0.7900s, where the current market price is. It’s highlighted in orange. A little bit hard to see because we’re zoomed way out here on the chart, but it’s highlighted in orange, down here into the 0.7900s. Follow it backwards in time and you could see the last time we were here was kind of the middle of a period of long-term congestion here for this currency pair. I have it highlighted in this blue box in the middle of the chart. You could see it’s right in the middle of that blue box.
Pink zone at the top of the box was resistance. Green zone at the bottom of the box was support. And right here in the middle was that orange zone, where the market used kind of as a hinge point. As it was above it, it went to the pink zone. As it was below it, it went down to the green zone. So, we’re at that key decision zone, where the market is either going to bounce and go back up or it’s going to breakthrough and continue to go down in the direction of the downtrend.
We follow it back in time even further. We could see some support here. Some congestion here. Some congestion here. Support, congestion, and resistance on the far left-hand side. So, historically that orange zone is kind of a key decision point. Above it goes higher. Below it goes lower. If I take that blue box and just drag it back over a little bit, let me see if I can get it selected here, and drag it back in time a little bit. We take it like this, and you could see that’s kind of a decision zone here for this currency pair, between the top and bottom of that box, and that’s right in the middle, where we are right now for the NZDUSD.
The other thing I want you to see is the red trend line coming up from the bottom. It’s connecting with a couple of the lows, or actually three of the lows. I guess you could call it four if you count two of them right here. Four lows here within that red trend line, and that’s the uptrend channel that we see right here, going up to the highest high. That’s where the current market price is sitting. That red trend line sitting right there, again, at that orange-shaded area, so it was a key decision point.
We are currently underneath this 200-period moving average. This is a 200-period simple moving average here on the currency pair and we could see we’re underneath that right now, challenging back down to the orange-shaded area. So, under the 200 moving average, in the direction of the trend, yesterday during the Trade Room I said if it opened and closed, stayed underneath that pink zone, you were looking for the continuation lower, back down to the orange-shaded area. So, if you did that, you’re protecting profit as we’re talking about it right now for the NZDUSD.
Let’s take all that information, and keeping in mind this red trend line and orange-shaded area, down to the Daily Chart. And as we get down here to the Daily Chart, just squeeze it in just a little bit. There’s the red trend line down there. There’s the orange-shaded area. So, if you did sell it under the pink-shaded area, as we discussed yesterday in the Trade Room, if yesterday’s candle closed under the pink-shaded area, underneath the 0.8080-level, we discussed potential sells on this pair. If you sold it underneath 0.8080, you’re now sitting with over a hundred pips of profit now, as it pushes down into the mid-0.7900s.
So, nice opportunity there. Hopefully somebody was able to take advantage of that opportunity. I do think that we will likely see support here today and we won’t see a continuation today at least of that downtrend. Now, that of course will change if it breaks underneath that orange-shaded area, but as long as we hold within or above that orange-shaded area, I’m expecting support. Doesn’t mean reversal, but it definitely means that we wouldn’t see a continuation of the downtrend. It just could settle out down, sitting on top of this orange zone similar to what it did on top of the pink zone over here since we know that historically this is accurate support here for this currency pair.
Breakout underneath the orange zone, we’ll likely continue lower. We already know where it’s going. If it breaks out lower, it’s going down to that green-shaded area down here at the bottom, into the 0.7800-level on the way back down. So, breaking 0.7900, we’re back into 0.7800. Holding 0.7900, we’re potentially back to 0.8000, but not looking for that yet, until we see clues to support and reversal. This is the Daily Chart.
Let’s just scroll back in time, just a brief time. I want to see that orange-shaded area back here. I want to see the green zone. I want to see the pink zone. We want to see how the market handled that back here in time, back in May, June and July, and August even of this year. How it bounced around that orange-shaded area. A little bit further back you could see the support, congestion around the orange-shaded area. A little bit farther back. Here is some congestion around it. Support over here.
So, we know that this orange zone is a key decision point, and I think even more important is that red trend line coming into play right now. Zoom it down to the 4-Hour Chart, and we’ll have to get it back to our current time on the 4-Hour Chart. And zooming it down here to the 4-Hour Chart, there’s the fall. There’s the open and close. There’s the settle out underneath the pink-shaded area that we talked about during the Trade Room yesterday. So, if you were there, you were able to get the clues that we talked about there underneath the pink-shaded area up here and talking potential sells there, and there is the targets as it pushes all the way back down into the orange-shaded area.
So, if you sold it, you’re protecting profit. Don’t sell it now. This is a terrible place to sell it. Remember buy low, sell high. You don’t really want to sell it into support. You’re looking more now for clues to support and reversal. A breakout would be continuation, but it’s going to need to open and close underneath the orange zone. Again, if I put a little circle right here, it needs to do this. See if I can draw this out. It needs to do this, and I’m going to change that to a circle. Let’s make it blue. Make it a little bit thicker. It needs to do this.
Where it opened and closed, broke out underneath the pink zone, it will need to do that underneath the orange-shaded area if we’re going to see it continue to go lower. So, it’s not even close to being a breakout right now. So, I think today your main focus, if you’re selling from the pink zone, you’re protecting profit now into the orange zone. You don’t sell it now. This is a terrible place to sell it, sitting on top of support. More likely today, unless you’re already selling and protecting profit, you’re looking for clues. You’re looking for potential reversal indicators. Could be a hammer candlestick, inverted hammer, engulfing candle. A number of different things. It could be just higher highs and higher lows. Give you a clue to some potential reversal.
If you’re looking to sell this, which of course is a logical decision in the direction of the trend, I think it either needs to go back up to the pink zone to sell it or break underneath the orange-shaded area today for the NZDUSD.
