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I’m getting started today on the New Zealand Dollar versus the US Dollar [NZDUSD]. I think it’s important for us today to reacquaint ourselves with the Weekly Chart because there’s some history here into the price levels that we’ve been in recently that we need to take note of. You go back to the left-hand side. We’re going all the way back into July of 2011, where we made the highest high that we see here. Going back, multi-year high, left-hand side of the chart, all the way up towards the 0.8800-level.
I have it circled in blue, where the vertical, dashed, red line is on the left-hand side of the chart. That’s the top, horizontal red line. Then the lower, horizontal, red line that we see here is the next historical resistance high. It’s circled in blue also. We’re looking back here into April of 2013. So, important to remember the history into these two levels. The two red lines here. The two blue circles. Those are critical historical resistance levels.
Now we go into the current timeframe, where we can see this red box over here on the right-hand side of the chart, and that’s where the market has been holding as resistance, underneath that last historical resistance high that we can see here on the Weekly Chart. So, now that we’ve looked at that Weekly Chart and history there, let’s go ahead and take that information down to the Daily Chart. And there’s that same red box over here on the right-hand side. A bit of a range that has developed here for this currency pair.
We’re going between the mid to low-0.8500s at the bottom of the box. We’re looking about 0.8515 or 0.8540, highlighted in yellow at the bottom of that red box. Then you go back up to the top, back towards where that horizontal, red line is. The bottom, horizontal, red line. There’s the top one up towards 0.8800. Here’s the lower one right around the 0.8670s, towards the 0.8690s, just underneath 0.8700. I have it highlighted in blue at the top of the red box, but you could see where the top of the range is, capping out at that historical high, into the upper-0.8600s. So, we’ve been stuck inside this range for quite some time.
We go back to the left-hand side of the red box. We’re going back to mid-March. March 13, where we have been bouncing around, top to bottom of this range for quite some time. Well, here we are today, approaching the bottom of the box. Let’s go ahead and zoom in one more time. We’re approaching the bottom of the range. The bottom of the red box there. And the question of course will be: are we going to find support, as we have the past couple of times that we’ve challenged the bottom of the range, or eventually are we looking for a breakout?
And I think, at least at this point, we have to make some assumption that the bears that have been in control for the past couple of weeks are going to stay in control. They’re going to continue to pressure down towards the yellow-shaded area, back down towards the bottom of the range. And eventually, if we do indeed see the breakout underneath the 0.8515-level, the 0.8500-level, the yellow-shaded area at the bottom of the chart or bottom of the range, then we look for a continuation lower.
So, let’s go ahead and put an arrow in here. This black arrow represents our expectation. A breakout underneath the yellow-shaded area, then we look for a continuation lower and the bears to stay in control. Forex Black Book trend bar at the very bottom of the chart, the red bar at the bottom tell us that there’s a bearish bias right now to this currency pair, to the NZDUSD, so that gives us some expectation we could see that breakout finally of that yellow zone, but it doesn’t have to.
Of course we could be looking for clues to support, clues to reversal and a turn back up in the direction of what is or has been, over the long-term, an uptrend for the NZDUSD. So, if it finds support again, there into the low-0.8500s, we could be looking for reversal, just like it did here, here, and here. So, within or above the yellow zone, we look for potential clues to reversal. You could go down to the 4-Hour, the 1-Hour. Look for candlestick formations or patterns, price action that implies reversal to go back up, or we also look for the breakout underneath that yellow zone and a continuation lower.
I think we could also take a trend line here. Just put it on the last two lows, and let me make that a different color, so it’s easier to recognize here. Let’s make it a bright green trend line there. So, you see that bright green trend line there connecting our last couple of lows within the range. As long as we stay above that green trend line, again, I would expect that we’re potentially looking for reversal to go back up in the direction of the longer-term trend. And open and close, clear breakout underneath there, we look for it to go lower.
All right, that’s the Daily Chart. Let’s take all of that information down to the 4-Hour Chart today. I’m going to zoom out a little bit so we could see all of that history back there on the 4-Hour. Squeeze it in. There’s our yellow zone at the very bottom of the chart. That is our historical support that we can see over here. There’s the green trend line I just placed there. Again, within or above that yellow zone, as we’ve seen the past multiple times, potential support, reversal and a turn back higher again.
So, the closer it gets to the yellow zone, I would be very discouraged about selling it within or on top of that yellow zone because history has shown us support there. Support becomes a buying opportunity. A clear breakout underneath that yellow zone, we begin selling once again. Now, the other side of the story is this: what if it doesn’t go down to the yellow zone? What if it goes back up? Well, as we go back up, history has shown us this pink-shaded area has held as resistance. You go back over here, over here. You see support and congestion. Support here.
So, history has shown us that this pink-shaded area has potential to see some resistance today. If not, the pink-shaded area, we once again go all the way back to the top of the range, into the blue-shaded area at the top of the red box and the range for the NZDUSD. Red trend bar, Forex Black Book, of course we’d want it go up. If we’re going to look for a new sell or bearish signal for the Forex Black Book, we want it go up. Take a look at where all the red arrows on the chart are. They happen after a rally higher. We see a rally higher. Resistance. Red arrow. And majority of the time, when you see those red arrows, you see a bearish movement after you see that red arrow.
So, the expectation with the Forex Black Book is that it would go back to the pink zone or the blue zone, find resistance, give us a new red arrow, and then we seek it. So, sells on rallies into resistance or buys on dips into the yellow zone are your potential opportunities today. Clearly the breakout of the yellow zone continues the pressure lower for the NZDUSD this week.
