NZD/USD Turning Lower from Confluence of Resistance
- NZD/USD resistance by way of two degrees to keep upward price movement contained
- Looking for a turn back lower to take hold
- Entry near 6800 offers good risk/reward for a move to 6700 or worse
The New Zealand dollar has experienced a nice bounce this week, with NZD/USD moving from its worst levels in over two months to its best in two weeks. Today kiwi is pushing lower from pretty solid resistance, which should lead to lower prices in the near-term. Several inflection points exist in the 6800/50 vicinity. This area acted as support in April, but then turned into a level of selling interest in May.
Another level (angle) of resistance is the bottom-side of a trend-line broken a couple of weeks back. The coinciding horizontal and sloping resistance makes for a good spot to see NZD/USD turn lower from, as it is beginning to already do such.
I am not necessarily looking for a trend resumption from the April peak, but a dive back lower towards 6700 (or worse) is reasonable to expect. The closer to 6800 or even higher, without moving above 6855, the better the entry. This will allow for a good risk/reward ratio of around 2:1 or better. If the trade is to work out, a move above the mid-May peaks shouldn’t take place. If we do see a rally above resistance then a reversal back lower on the daily time-frame (forming a reversal bar), we would consider this a rejection of overhead levels and may present an even higher conviction trade. If stopped out prior to this event, a second entry may be warranted in this case. Not every trade idea will work upon the first signal, sometimes you have to ‘fish’ a little before catching the intended move.
Created in Marketscope II
---Written by Paul Robinson, Market Analyst
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.