NZD/USD Price Analysis: Bears get set-up to take on bulls at critical support
|- NZD/USD is in the throes of a move to the downside.
- There is a strong level of support ahead of an otherwise target area.
The kiwi has been under pressure at the end of the week as the US dollar catches a bid.
Bears will note a break of structure in the kiwi which gives rise to prospects of a weekly continuation to the downside.
The following is a top-down analysis that illustrates the longer-term bearish bias and the recent price action, prompting the motivation for a sell limit setup:
Monthly chart
The monthly timeframe offers a bearish outlook for the near-term, in anticipation of further downside to firstly fill in the wick and secondly to form the right-hand shoulder of what could be a reverse head and shoulders.
Weekly chart
The weekly chart shows that the price is on the verge of completing a bearish head and & shoulders as bears start to fill in the monthly wick in 'Wave-3'.
Daily chart
From a market profile analysis, there is a strong level of volume that has been traded within the above support area, from a monthly point of view, (Monthly Volume Point of Control, VPOC).
This high volume area could prove to be very strong support and should be factored into a position management plan.
Dipping the toe until 0.6550 could be the way to approach this level of support, with half risk positioned until adding to the positions below it and towards the full target.
If the support holds, there is a high probability that the bulls will take over, jeopardising the trade setup and running the risk of the stop loss being triggered.
In such a scenario, the target should be raised to the entry point for a breakeven best-case scenario.
4-hour setup
Meanwhile, as illustrated in the 4-hour time frame, there is a 1:3 risk to reward ratio on a sell limit placed in the 38.2% Fibonacci and counter-trendline resistance confluence area with the stop loss above structure.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.