NZD/USD might lead the way lower and a pickup in FX volatility
|It is like someone hit the snooze button for FX markets. FX volatility keeps declining, and the search interest in EURUSD might soon be back at the same multi-year lows we saw before the Coronavirus crisis. However, things might change, and the NZDUSD looks to lead the way.
Worldwide Google search interest in EURUSD, last five years
The New Zealand dollar vs the US Dollar has been coiling over the last couple of months in a large bearish descending triangle, and this follows the slide of a smaller pattern that I reported on in June. The pattern in June suggested that NZDUSD could slide by 180 pips, a target that we reached, whilst today’s pattern suggests the NZDUSD might trade lower by 392 pips
Descending Triangle Pattern
For the market to form a descending triangle pattern, the price needs to bounce from a horizontal support level. That level, in the NZDUSD, is the 0.6913 level. The price bounced from or near this level this week, last week, June 18, and March 2021.
The next ingredient is the downward sloping trend line, and we find such a line by connecting the 2021 and May 2021 highs. Subtracting the difference between the May 2021 high and the horizontal support level from last week’s low suggest that the NZDUSD might decline to 0.6522.
Further adding to the bearish bias is that since June 18, the price has formed a bearish rectangle pattern, and this pattern suggests a slide to 0.6735. Therefore, it is likely that both longer-term and shorter-term traders might see value in shorting NZDUSD on a break to last week’s low.
NZDUSD Daily Chart
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