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I’m going to begin the day today on the New Zealand Dollar versus the US Dollar [NZDUSD]. Starting here on the Daily Chart, I want to first identify a range that this currency pair has been bouncing around in for quite some time. First off, we go to the left-hand side of the chart and we start over here, all the way back in September of 2013, where we made a high into the blue-shaded area, just here right around the 0.8400-level. And since then, for the most part, we have seen the market holding between the 0.8400-level and the yellow-shaded area that sits down here at the bottom of the chart into the 0.8100-level.
We did have one instance where the market pushed above those recent highs or above that high at 0.8400, but other than that it’s capped out. And I want to illustrate this in another way. Let’s go ahead and take a highlight here – this shape right here – and you could see, along that orange-shaded area at the top, there has been historical resistance multiple times inside that orange box. Again, with the exception of that one instance where it pushed above it.
And then I can take another highlight here at the very bottom, and I’m going to also drag it all the way back here to the left, and we highlight it like this and we could see historical resistance back here. Left-hand side. Resistance, resistance, resistance. And then, over the past several months, again we have found support. So, we’re highlighting the top and the bottom of what has been a range really since September of 2013. And once again, here we are coming and pressuring towards the top of that range. We’re coming and pressuring towards the top of that orange-shaded area.
Now, that’s a horizontal way to look at it with those orange-shaded area. The top and bottom resistance and support. But I’ve also identified it in a diagonal way, capping out the resistance highs with a red trend line and the bottom support lows with the red trend line. You could see this bearish or diagonal downward-facing trend channel, where we could see the highs getting lower, the lows getting lower along this bearish or downward-facing trend channel. So, if you look at it that way, in a diagonal fashion, or a horizontal fashion, you can see that we’re now approaching – quickly approaching – the top resistance within that range.
Highs within the range. Lows within the range. We’re approaching the highs within that range. So I just wanted to point that out to you first, before we continue to look at some more intraday opportunities, but a wider range here still developing and we’re approaching the top of that range.
Let’s go ahead and take that information down to the 4-Hour Chart. And of course I’ve been talking about the choppy behavior of this currency pair over the past several weeks in the Trade Room. How it’s found resistance and support at each one of these highlighted zones that we’ve been talking about. Over the past few days, the purple and the blue-shaded areas significantly holding as support in the blue zone. Resistance into the purple zone. Now we’re breaking above the purple zone, approaching this green-shaded area at the very top of the chart.
Follow it back in time. Again, that green-shaded area shows historical resistance significance. You can see that over here on the left. Also, taking Fibonacci measurements from the highest high down to the lowest low that you see here on the 4-Hour Chart – highest high to lowest low. Taking those Fibonacci measurements, we find the .786 fib right at 0.8350. 0.8350 is the .786 fib. That’s right there in the middle of that green-shaded area, matching up with these resistance highs over here on the left.
So, as it approaches this green-shaded area, I am expecting resistance right here into this green zone. If it breaks through there, I have another area that I’m expecting resistance, and that’s right there at the blue-shaded area that happens to sit where the .886 fib. .886 fib is at 0.8288. 0.8288, and that is the next level higher and that’s the blue-shaded area. It’s also closer to that red trend line. So, either way you look at it, we’re approaching significant resistance, whether it’s the horizontal range – top of the horizontal range -, whether it’s the diagonal range along the red trend line, whether it’s either one of the fibs that we’re seeing here. .786 or .886 fib, we’re approaching resistance.
If you’re buying, if you’ve been buying from low points or buying into support, these become potential profit targets as it reaches the green or the blue-shaded area. You’re protecting your profit. You’re closing profit. These are potential profit targets if you’re buying right now. If you’re not in a buy, I might not suggest a buy unless it dips back down into support. Maybe a dip back down to the purple-shaded area, where we historically have found resistance along here. That may become a buying opportunity.
In fact, let’s go ahead and put an arrow there because that is our closest support. The purple-shaded area is your closest support. So, buying right now into resistance is not the best low risk, high reward scenario. In fact, the closer you get to the green zone or the blue zone becomes a low-risk scenario for selling rather than buying. If you’re looking for a buy, buying on a dip into support very similar to what it did here into the blue-shaded area is what you’re looking for on top of the purple-shaded area.
So, for the day today, rallying into the mid-0.8300s, 0.8350 or so, becomes a selling opportunity with minimal risk. You target back down to 0.8300, the purple zone, or lower. If it breaks through there, it’s likely that you might want to close out pretty quickly on those sells or if you have the risk available, you might have your stop above the 0.8400-level and add on into the blue zone. So you have two opportunities to sell, depending on how you want to manage your risk, whether you put tight stops on a sell into the green zone, get out and add on again at the blue zone, or you enter a sell at the green zone and then you add on again at the blue zone.
Either way you look at it, I believe we’re looking for sells on rallies into resistance today. And the only thing that will invalidate that, change that entire scenario is if it breaks above this blue-shaded area and that red trend line. We’re likely looking for the continuation of the uptrend. You’ll want to close out all of your sell trades at that point and begin looking for new opportunities to buy the NZDUSD on a breakout above the longer-term range.
Forex Black Book is red. It’s a darker red, so it’s a cautionary red. You’d want it to be bright red. I believe what it’s going to take to make that turn bright red is a hit of those resistance levels – green or blue -, turn back down. Then we’ll likely, over time, see that turn bright red again. So, right now we’re holding off on those Forex Black Book trades because it’s dark red. We want it to turn bright red first, but I believe the green and blue-shaded area are one of those two decision points where we could see this market turn back down in the direction of a downtrend for the NZDUSD.
