NZDUSD challenges its May highs
NZDUSD closed the week in another price gain on Friday,
making it the third consecutive weeks of higher price gains since putting in a low in Jun’06.The pair is now challenging its May highs, the 200 ema and the horizontal resistance drawn on previous lows and highs.
Figure 1: Daily Chart
Following a peak in March 2005, NZDUSD sold off for another three months until it halted in July’05 forming a four-month triangle consolidation pattern which ultimately broke to the downside in late Nov(weekly chart), that same year. A brief three-week rally into Jan’2006 followed which resulted in a sell off after a failed retest of the breakout point taking the pair to a low of 0.5991 in late Mar’06.In the month of April/May, NZDUSD rallied off Mar’06 low to a high of 0.6448 in May before an unsuccessful attempt at retesting the May high pushed it below its Mar’06 low at 0.5929 in late June. It has since advanced off that low and now challenges the horizontal trendline/200 ema/May highs making it the third times it is challenging that zone..
Figure 2: Weekly Chart
Will this third attempt result in a break above these mentioned levels? A look at the charts should provide clues as to what we might expect in the days and weeks ahead in this pair.NZDUSD for the first time since Dec’05 closed and held above its 100 and 50 emas now turning them to support in case of any pullback.Second, on the weekly chart, the pair broke and closed above its 200 ema, the first in three months supporting price action on the daily chart. Finally, momentum indicators on the weekly and monthly charts have turned positive which suggests that higher price gains are expected. Although clues for higher price gains outweighs that of price losses in this pair, an overbought daily stochastics displayed at the bottom of the chart might lead to a pullback/consolidation especially now that is occurring(overbought condition) at the time NZDUSD is approaching an important resistance zone.Conversely,a break of 0.6448/31 levels paves the way for a test of Feb’06 low/.50 Ret at 0.6561/72 and if the pair pushes above this level, the next target will be July/Dec’05 lows at 0.6702/41 zone. A risk to this analysis would be a break below the 100/50 emas now at 0.6293/51 zone ahead of Aug swing low at 0.6143.
Figure 3: Monthly Chart
On the whole, as long as the situation on the weekly and monthly charts remain intact, higher price gains should be expected. In addition, the unwinding of the overbought condition on the daily chart in the form of a pullback/correction should provide buying opportunities, which should propel NZDUSD higher.
Happy Trading
Mohammed Isah
is a private trader and an independent technical analyst. He initially traded stocks and now primarily focuses on forex. He produces Weekly, Mid-Week and Friday forex technical research which is available at
www.tradingmarkets.com/fxtechnicalresearch.
He also has a Daily, Weekly and Monthly pivot points reports. You can contact Mohammed on his pivot points reports and other enquiries at:
sahmo@gmail.com