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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, we have several trends that we can take a look at. Going all the way back to the left-hand side of the chart, we saw some congestion, where the market ranged for a period of time on the left. Then we capped out into a high. We saw a downtrend take place, as it fell from up here into the 0.8600s all the way down here towards the 0.7700-level.
A little bit of a rally back here, into the 0.8100-level. A new fall and challenge down into the low-0.7700s. And most recently, we’ve seen a climb from the low-0.7700s all the way back up here into the 0.8500s at the top of the chart and into the pink-shaded area at the top of the chart. Since capping out there into low-0.8500s, over the past couple of weeks, we’ve seen a little bit of a change in the pattern, where, previous we were in an uptrend, we’ve seen the market starting to push back down and creating a lower high.
And that’s really defined by these last two highs here. I’ve put two black X’s here to identify those highs. The highest high at the top of the black X and our most recent high with the black X here. What’s interesting about this high and the green-shaded area that we see here right around the 0.8400-level is, following it back in time, it also matches with the high on the left-hand side. And for anyone that follow charting patterns, you may begin to recognize this as what could be potentially a head and shoulders reversal pattern, where along this green-shaded area and these two black X’s are the shoulder pattern and, of course, the head being up here into the pink-shaded area.
What we’ll need to see to confirm the reversal for this pattern would be a breakdown of the yellow-shaded area, which are our last two supports within the pattern. You could see the support here into the yellow-shaded area. And this shaded area goes between 0.8225 and 0.8185. That’s the yellow zone, as it is highlighted here on this chart. So, we can see the last several times finding support along that yellow-shaded area, but most significantly, not just in this timeframe. We go back to the left-hand side of the chart and we could see some support over here, back into March of 2013 and even going further back into December of 2012, we saw much support into this yellow zone.
So, following it back to current time, that was our current support for the day today. The yellow-shaded area. As long as it holds within or above there, potential to reverse, go back up towards the shoulder level, the blue-shaded area, or even a breakout continues to challenge all the way back to the highest highs and the pink-shaded area at the top of the chart. Otherwise, a breakdown of this yellow zone and our last supports that we see here looks for a continuation lower and a change of the trending pattern, which, again, was higher highs and higher lows. Any new low to be made, if it makes a new lower low that confirms a change of the trending pattern and a continuation lower.
I expect that our next support will be this purple-shaded area. And let me go ahead and put a black arrow down there onto that purple-shaded area, into the 0.8100-level. Follow that purple-shaded area backwards in time; you could see the historical resistance over here on the left-hand side. So, these resistance in the middle of these two trends – the downtrend and the uptrend – there’s actually three resistance I would point out here inside that purple-shaded area. One, two, three back here on the left-hand side. So, those become our next support target if and when we do break underneath that yellow-shaded area in between the 0.8185 and 0.8225-level, into this yellow-shaded area.
So, once again, staying above it, we potentially bounce back up to the blue zone. Breaking underneath it, we look for a continuation back down here towards the purple-shaded area. Let’s take all of that information down here to the 4-Hour Chart; and again, there’s the same shaded areas here on the 4-Hour Chart. The blue-shaded area, which has held as our resistance. The green spike high, where we’ve seen the two shoulders of the head and shoulders pattern. Our current support lows into the yellow zone, between 0.8225 and 0.8185.
If, again, we breakdown through this zone – and I won’t really be looking for just a spike into it, because we’ve seen that before. Go back in time; we saw spikes into the yellow zone as deep as the 0.8190-level. And I’m going to actually bring this line up – the black line at the bottom – right to 0.8190. We’ve seen spikes before to 0.8190 here. We saw it over here on the left-hand side, and then it turned right back around and went back up. So, I won’t really be looking for just a simple spike into the yellow zone, but more of a break and open and close underneath it.
Now, there’s plenty of room between the yellow-shaded area and the purple-shaded area at the bottom to make some profit for us to be patient and allow the market to breakdown underneath that yellow-shaded area. Remember that zone goes between 0.8190 and 0.8225. So, we could look for an open and close underneath there, retest underneath it as resistance, and look for opportunities to look for the fall back down to the 0.8100-level. An open and close underneath there really gives us the confirmation we need to see that breakout as it looks for it to go lower.
Otherwise, as I pointed out there on the Daily Chart, that as long as it holds within or above that yellow zone, there’s potential for it to continue to find support and bounce back up again. The best opportunities, of course, will come on sells on rallies into resistance. That gives you your lowest risk, highest potential reward opportunities. I’ll be looking for a breakdown of the yellow zone to be that opportunity that I’m looking for to challenge all the way back down to 0.8100. Otherwise, if you’re looking on the other side of the market and looking for buying opportunities, as long as we hold within here or above the yellow-shaded area, potential for a rally back in towards the 0.8320s, the blue-shaded area.
I’ve also taken Fibonacci of the last high that we see all the way up here into the pink zone down to the lowest low. We saw retracement back to the .618. We’re now seeing a challenge all the way back down to the yellow zone. If we see a pullback once again, the blue-shaded area likely becomes our next resistance before falling back down towards the yellow zone, or the breakout. And if it gets above this blue-shaded area, I think we’re likely looking for the turn back to the shoulder level, which is the green-shaded area. And of course, above that we’re all the way back up into the pink zone at the top of the chart.
Main decision point is this yellow-shaded area today. Opening and closing within or underneath it, well, underneath the yellow-shaded area, we’re looking for it go back down to the purple zone. Staying within it, just a simple spike into it doesn’t entice me, but an open and close does. Underneath it looks for it to go lower. Staying with it or above it, we likely look for a turn back higher. It’s not too hard to see that we could see three or four more bounces here on the yellow zone. That’s what we’ve seen back in history for the NZDUSD, where we have seen support all along that yellow-shaded area. So, for the day today, looking for a breakout here. Underneath the yellow zone to go lower. Otherwise, holding as support and potential for bounces back higher for the NZDUSD today.
