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NZD/USD Elliott Wave Analysis: Fourth Wave Close to Terminating

NZD/USD Elliott Wave Analysis: Fourth Wave Close to Terminating

Jeremy Wagner, CEWA-M, Head of Education


Talking Points:

-NZD/USD favored pattern is that wave (iv) of a five wave bearish impulse is complete or nearly so

-Be on the lookout for a bearish motive wave to develop from nearby levels

-Below 72 cents we are biased to a retest of 67 cents

NZD/USD has continued to follow the larger bearish impulse pattern. Since our last report in November, NZD/USD has rallied in wave (iv) to measured resistance near 70 cents.

This implies the next wave, wave (v), may begin from nearby levels and is a bearish motive wave. Motive wave is fancy words that the wave is likely to be itself an impulse or a diagonal.

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NZD/USD is following the playbook of a typical fourth wave of an impulse. Fourth waves typically retrace about 38% the length of the third wave. That Fibonacci retracement level comes into play near .7032. NZD/USD has rallied to a high of .7034.

Also, we can take a trend line connecting the end of waves (i) and (iii) and draw a duplicate of that line placed at the end of wave (ii). It will give us a general target zone for a wave (iv). As you can see the chart below, price has been testing this line for the past week.

Lastly, the guideline of alternation suggests that the shape of wave (iv) typically alternates with the shape of wave (ii). We are showing wave (ii) as a sideways complex correction. Therefore, we can anticipate wave (iv) to be a zigzag and we can identify a zigzag on the price chart below.

Bottom line, we are anticipating NZDUSD to turn lower from nearby levels. So long as NZDUSD is below .7223, our bias is bearish.

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Have you ever wondered why most traders lose money? This could be why.

---Written by Jeremy Wagner, CEWA-M

Jeremy is a Certified Elliott Wave Analyst with a Master’s designation. These articles are designed to illustrate Elliott Wave applied to the current market environment.

Discuss this market with Jeremy in Monday’s US Opening Bell webinar.

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Other Elliott Wave forecasts by Jeremy:

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.