Sophia Todorova has a background in teaching and psychology, and as such relishes the idea of assisting new traders on their journey to Forex trading success. Technical Analysis is her passion. The charts speak, and she listens.
The Nzdusd is not a pair that I trade much, however, it certainly deserve some attention for its recent performance. The monthly chart below presents an image that reminds me of a very similar setup on cable’s weekly timeframe. In breaching 1.6000, the Gbpusd invalidated what could have been the right shoulder of a head and shoulders reversal pattern. In the case of Nzdusd, the long-term up trendline was breached and retested. There was some pullback, but instead of following through with a reversal, the pair bounced back and closed firmly above .7300. That level, which had the potential to be the start of a new downtrend, since then has turned into support. The strength of the uptrend was again reinforced when after retesting the broken trendline twice, it pulled back to .7330s and bounced again. That trendline is currently being retested.
Having seen this action, it would appear that there is a strong case for the uptrend to continue in a slight channel, as price reacts to impacts against the trendline and the subsequent bounces. Looking at the daily timeframe, we can see a long wick which represents the sharp bounce that came after a pullback to test the broken resistance lines at .7700. There might be another pullback soon since the monthly trendline is being tested, but the bullish momentum is still very strong. Additionally, we have to consider that there could be an even deeper push through the line before the retracement occurs. It therefore calls for caution and the need for good confirmation before shorting. Immediate support lies at .7860 (4-hour trendline) and .7700 (daily resistance that was breached)
Thanks for reading. Safe trading, and a great weekend to you!!
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