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I’m going to get started today on the New Zealand Dollar versus the US Dollar [NZDUSD]. Starting here on the Daily Chart, over the past several weeks, within this red box, this currency pair has been basically in a range. We can go all the way back here, left-hand side of the red box, the beginning of March. So, since the beginning of March, we got above the green-shaded area, we bounced around between the blue zone, the green zone, the blue-shaded area, the green-shaded area, continuing to do that for several weeks.
Over the past couple of weeks, we saw a breakout underneath the range, which gave us an expectation we might be looking for a change in the pattern of the trend, which previously was an uptrend. We could be looking for a downtrend. For several days, about four or five days, we held within or just underneath the green zone, giving us an expectation of resistance, looking for it to go back down.
Well, it didn’t hold there and continued to break higher. We did have some news out of New Zealand that caused this to break higher, pushing it all the way back to the top of the range once again. Now, over the past four days, five days, we have been holding as resistance at the top of the range. That top of that range sits just right around or just underneath the 0.8700-level. So, for the day today, just like over the past four days, as long as it holds underneath that 0.8700-level and underneath this blue-shaded area, I’m looking for resistance for the NZDUSD. We’re looking for resistance and watching for clues and indicators of reversal from this zone.
Now, here on the Daily Chart, it’s pretty hard to find those clues of resistance and reversal. We don’t see any shooting star candlesticks or engulfing candles, or anything like that, that would imply reversal yet, but we do see that resistance holding and the sellers continuing to fight off the buyers at the current moment. If, at any time, we see a breakout above that blue-shaded area, then we’ll look for a continuation of the previous uptrend, but I just don’t think that it’s a good idea. There’s not a low risk, high reward opportunity right now to buy it underneath the top of this range and that blue-shaded area.
If you were to buy it right now, just like over the past four days, there’s a great expectation of resistance and the possibility of a dip back down. So, when do you buy it? If you’re looking for it to continue the uptrend or the breakout of the trend direction, you buy it in two areas. You buy it on a dip into support, which at least at this point is down there, closer to the yellow-shaded area, or a breakout above the blue-shaded area.
Let’s go ahead and zoom it in a little bit here on the Daily Chart and get a little closer view of that. So, there’s our areas right there. We could see the blue area, over the past four days, holding as our resistance. Sorry about that. I’m trying to get that deselected. We could see the blue-shaded area holding as resistance over the past four or five days. We could see even the market coming very close to the yellow-shaded area. So, again, if you’re looking to buy the NZDUSD, it’s better to buy it on a dip to the yellow zone or break above the blue zone. I don’t encourage you to buy it underneath the blue-shaded area because there’s a great expectancy of resistance. Otherwise, the lower risk, higher reward opportunities do start to evolve as it challenges here into the blue-shaded area.
So, what we can do is take all of that information down to a smaller compression; begin looking for some more detailed information. Some more opportunities to look for trading scenarios here on maybe the 4-Hour Chart. So, there’s our blue zone. There’s the historical resistance in there. As long as it stays within or under it, there is potential for that reversal to happen from the blue zone. If it breaks above the blue zone, of course, as I mentioned, we’ll likely look for it to continue to pressure higher in the direction of the trend.
Now, this hesitation here, without any strong movement from the sellers, does give me a little bit of a pause about suggesting a sell, but, again, as long as it holds underneath that blue zone, there is that possibility. Any challenges all the way up into 0.8700, 0.8705 becomes selling opportunities. Even with the Forex Black Book, red trend bar down there at the bottom. Interesting it stayed red, even with the strong bullish movement we’ve seen over the past couple of weeks. Even though it’s been going up, we see the trend bar being red. We do have two red arrows. So, if you go back in history, there is a probability of a fall back down once we start to see those red arrows, especially when we start to see two or three or four of them clustered together into a resistance.
So, as long as we have the red trend bar, the red arrows, and we’re at the very tip top of the longer-term range, the blue-shaded area, my suggestion today is for selling into the blue zone, as close as possibly as you can get to 0.8700. That minimizes your risk. Your risk is stops just above the blue zone. If it breaks out, you don’t want to stay in those sells any longer because it’s likely, at least going back to 0.8775 or even towards 0.8800. Selling into the blue zone, the only reason to switch your focus to a buy would be a dip into support, which, right now, is the yellow zone or a break of the blue zone.
One last thing before we move on. Let’s take Fibonacci from the highest high, down to the current low. Fibonacci of the previous downtrend range puts the .786 fib right at 0.8698. We’ll call it 0.8700 easily. Right there in the middle of the blue-shaded area. So, that’s giving us a clue to resistance. A breakout above that, .886 sits at 0.8735, just above the blue zone. So, that could give you your risk assessment and your stop placement with that .886 fib. Just underneath the market of course is the .618 fib at 0.8634 of that previous downtrend.
Let’s also take Fibonacci from the lowest low to the current resistance high, which is that high. The last high we just made. We also find the .236 fib of this current uptrend sitting there at the top of the yellow-shaded area. So, some Fibonacci overlapping at the top of the yellow-shaded area. That gives us a great clue to support. We have a great clue to resistance in the blue zone. So, if you’re going to sell or buy this currency pair, the blue and the yellow zone becomes your areas of interest for the NZDUSD today.
