NZDUSD: Steep Descent After Resistance was encountered Just above .8800
The daily candle chart below shows the medium term price history of the New Zealand Dollar (NZD) versus the United States Dollar (USD), known as NZDUSD, and trading around .8508 around time of publication today.
In the last post about NZDUSD earlier this month, the uptrend was approaching a long term horizontal resistance level just above .8800, which was noted as a likely barrier to further upside.
Since failing to break above that barrier, the pair has reversed into a bearish dive, and descending very fast and on a steep trajectory, also failing to find support on a long term bearish resistance line (point 6 in dark red on chart below) further below near .8550 early in the session today.
Over the past few days support was building on that line (point 6) but now the pair is diving to find support even lower. A long term bullish support line (point 4 in green) intersects near .8400 over the short term and which could be the next stop if this momentum continues.
If the long term bearish resistance line (point 6) is regained, and can act as support - a short term bullish recovery can occur, and a bullish support line parallel exists above current prices, and similar in slope to the long term bullish support line (point 4) further below.
Below are examples of how to trade a bearish continuation or a bullish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ .8548 with a Limit to take profit @ .8581 and a stop-loss @ .8518 Risk/Reward Summary: Limit risk = +33 pips profit / (-30) Stop-loss risk =Gain to Loss ratio = 1.10
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ .8497 with a Limit to take profit @ .8463 and a stop-loss @ .8531 Risk/Reward Summary: Limit risk = +34 pips profit / (-34) Stop-loss risk =Gain to Loss Ratio = 1.00
Medium term daily candle chart:
Longer term view of daily chart: