Picking a market turn: Are we ready to turn in the NZDUSD?

Author: Greg Michalowski | Category: Education

Trend line above eyed for a change in the bearish pattern

The NZDUSD has continued the move lower. Last week the high peaked at 0.7238. The pair has 4 consecutive lower closes. Today would be the 5th is the price can stay below the close from yesterday at 0.6927.  

What might turn the beat around?

You don't have to be complicated.

Looking at the hourly chart, the price has been tracking a trend line lower. That trend line has 5 points on it (including the current bar).  If we are to go higher we need to break above that line and stay above that line.  If it can happen, traders will see it and shorts might be inclined to buy shorts back.  New traders may look to buy low.  

Now what would be more bullish on a break?  

Looking at the 5- minute chart since the peak on December 14, follow the 100 and 200 bar MA lines (blue and green lines).  There have been attempts to get above those MA lines but there has not been much momentum. So buyers on the break, turned to sellers on the failures. That is what happens when the market is trying to bottom (or find a peak) after a run lower (or higher).

Today, the 100 bar MA (blue line has been broken very marginally on a few occasions including right now. If the low is in place, the best picture would be to have the price stay above the 100 bar MA, move above the 200 bar MA and move away.   Doing that will move the price above the trend line on the hourly chart AND get and stay above the MAs on the 5- minute chart.  Traders focused on each chart are getting bullish technical signals. That gives the pair a better chance to continue in the corrective direction higher.

Could it all fail again like it did on Dec 16th? YES!  There is no guarantee of success BUT risk can be defined and limited.  If we risk a little, there is the chance to make more than a little.  

Do you risk a lot on this trade?
My counter question is what has happened on past failures?  

The answer is the price trended lower.  Why chance a new trend lower.  Get out if the idea fails.

What you are hoping for is the string of failures stops. That the lower level finally attracts more buyers and that there is a meaningful correction.   

What is the next key hurdle if the 200 bar can be broken?

For me, I would love to see the close tested and broken at 0.6927. If that can be done, we don't have a down day (after 4 straight down days).  That is a step in the right direction.  

If you are trying to pick a bottom, listen to the market.  How do you listen to the market? By watching the price action and applying tools to it.    If there are buyers, you will see it in the what the price does. The tools give you ability to measure bullish and bearish and MOMENTUM.  If the tools are widely used, you will see some sort of action around the tool.  That can define a break and reversal is in the works, OR not yet. The trend is still in tact.