NZD/USD Price Analysis: Bears get set-up to take on bulls at critical support

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.