The price action for the NZD/USD could best be described as desultory over the last few weeks, with the pair having failed to continue the bullish momentum of September, finally running into resistance at the 0.8335 region on the daily chart, before sliding lower during October. So what is our trading software telling us about the future direction for the pair in the medium term?
First, the trend on the daily chart has turned bearish in the last few days, with the recent sideways price congestion shown in white, finally transitioning to red in last weeks trading. Simultaneously the trading indicator has also turned bearish reflecting this change in sentiment. Whilst the volume on the daily chart has been mixed over the last few days, with some buyers in the market on Friday, the three day volumes have remained firmly selling since mid October. The key now will be a change in trend in the three day chart which remains bullish for the time being. However, should we see a white trend dot here or ultimately red, then this will add further confirmation to the current bearish picture and the prospect of an extended bearish trend in due course.
The indicator has also delivered an initial entry signal, an aggressive volume entry which arrived on Tuesday last week. For conservative forex traders, we are now waiting for the trend on the three day chart to transition to red.
Finally moving the price chart itself, the upper level of price congestion is now clearly defined with the three isolated pivot highs in the 0.8350 region, whilst to the downside, a platform of support is now being built in the 0.8100. If this region is breached then expect to see the pair move lower in the short term, with a change in trend on the three day chart adding further bearish momentum in the longer term.
By Anna Coulling