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I’m going to start the day today on the New Zealand Dollar versus the US Dollar [NZDUSD]. I’m going to start all the way out here on the Weekly Chart and get a larger perspective for this currency pair. Going all the way back to 2011 is where I’m beginning. Top of the chart – highest high that we see here on the Weekly Chart. We could see the fall beginning to happen as the highs begin to get lower. We can see a fall along this red trend line, even the high that’s over here into April of 2013 being lower than, of course, that high in 2011. And then our most recent high here into October of this year, just a couple of months ago, we see a new lower high even lower than the previous high in April.
So, the highs are getting lower along this top red trend line. And we can see the lows getting higher along the blue trend line. We could see, starting back here again, back in 2011. Late 2011 we see the climb is here into 2012. We see a little bit of a higher low. And then, of course, here into 2013, we see higher lows. So, lower highs, higher lows shows us this triangle-type pattern, a consolidation-type pattern that we see here all the way out here on the Weekly Chart.
It’s not a long-term trend. We don’t see a long-term trend like what we see over here on the left-hand side of the chart. Just an upward trend as it continued to pressure higher over the past couple of years. It’s just been getting tighter and tighter within this triangle here. Over the past few weeks though, we’ve seen a little bit of a fall as it’s come back off since October – off of the highs. It’s been falling in a bit of a channel as it’s falling back down here into the 0.8100s for right here in the middle of this triangle pattern.
So, at this point, here in the middle of the triangle, there’s really two opportunities. It could either find support and start climbing back to the top of the triangle or continue the downfall and push back down towards the blue trend line and the bottom of the triangle. So, be watching for opportunities in both directions as we look for a trade within this consolidation triangle on the Weekly Chart.
Let’s take that information down to the Daily Chart. And here, on the Daily Chart, we could see the blue trend line at the very bottom of the chart, and that’s from the weekly and the red trend line at the very top of the chart from the weekly. And again, we’re right in the middle of that triangle pattern from the Weekly Chart. The current market price is right in the middle. The pink-shaded area in the middle of the chart is where our current market price is. Now, over the past few months, we’ve been following this downward-facing red trend channel. As we can see, the market has been falling within this downward-facing red trend channel. The lower highs have been getting lower along the top red line. The lows have been getting lower along the bottom red trend line. So we could see this falling trend channel that we see.
And as long as it stays underneath that top red trend line and within the channel, we potentially look for resistance and a continuation of this downward fall as it pushes back down towards the bottom of the channel, back here into the 0.7900s or potentially all the way back down to the bottom of that blue trend line from the weekly triangle. The other side of it is if the pattern changes – this falling channel changes – and we see a break above it. We likely look for the continuation back higher, a new uptrend begin develop, and we look for a turn all the way back up into the 0.8500s and the top of that weekly triangle and the red trend line at the very top of the chart.
So let’s go ahead and zoom it in here on the Daily Chart so we could see those channels a little bit closer. And again, the pink-shaded area, the top of the trend channel, the red channel is what we’re looking at. If we see a break above that, we likely look for the go-ahead and go higher as it pushes back towards the top of the trend channel. As long as it stays underneath the top of that trend line, we could see a fall back down. One other interesting aspect that we could see here is the black trend channel. It’s just a shorter look at this.
The Weekly Chart was the triangle. Here on the Daily Chart we see the red trend channel. And now we also can develop this black trend channel, just showing us shorter-term perspective of this currency pair. And what I find interesting is the black trend channel – the downward-facing channel that we see here – and the red trend channel all coming together right here into this pink-shaded area. So it’s a critical decision point today, going into the later part of this week, into the new year and maybe even into next week. As long as we stay underneath these two lines, potential to continue back down towards the bottom of the weekly triangle. If it breaks above here, we likely look for the continuation higher.
Let’s take this information down to the 4-Hour Chart. And as we get down here to the 4-Hour Chart, we can see that upward movement as it’s climbed off the bottom of the black trend channel and again coming back up towards the top. The pink-shaded area is a critical decision point, as I just outlined on the Daily Chart. As long as it holds within or underneath it, we look for resistance and the possibilities of going back down. If it breaks above here, we look for the market to continue to pressure higher, the bulls to take over, and a turn back up here towards the 0.8300-level.
So, if you’re looking for a trade today, which may be a little bit risky, we have a shorter trading day. Many brokers closing early because of New Year’s Eve. If you decide to trade today, but maybe not even today, but going into late this week – Thursday or Friday, or even early next week – we’ll be looking for resistance into the pink-shaded area. Possible selling opportunities to take this back down to the yellow zone or lower. A break above the pink-shaded area, we look for the continuation higher.
The Forex Black Book trend bar has turned bright green, which leads us to believe that a bullish action is the main direction we want to focus in on. So, what we would look for with that is that we’d look for the breakout above the pink-shaded area, possibly a settle back down to the top of the pink-shaded area as support, and then a new buying opportunity to go back up towards the blue-shaded area and a breakout of this trend channel and the continuation higher, towards the top of the weekly triangle that we studied at first for the NZDUSD.
