The New Zealand Dollar exchange rate is wedged between support at 0।5035 near the previous swing low and the upper boundary of a bearish channel that has contained prices since December। A bearish Inverted Hammer candlestick has been followed by a Doji as prices increasingly run out of room to continue moving sideways। A breakout looks imminent, with the convincingly bearish bias of the overall trend favoring a short position. We will look for a daily close below 0.5035 on the current candle and position to sell NZDUSD, initially targeting multiyear support/resistance at 0.4790.
INDICATOR OF THE DAY" - REVERSAY DAYS
Over the past several years we have grown quite comfortable with candlestick analysis because of its ability to provide a clear picture of developments within price action. One of our favorite indicators is simply looking at price action on a given day to help better understand what exactly the markets could be telling us.In the above example, we can see that Usd/Jpy price action is starting to look bearish and could be warning of a short-term top. After rallying sharply for four consecutive days, the market has finally stalled out on Friday, unable to post a fresh higher high above Thursday’s high, and subsequently breaking back below Thursday’s low. This sets up a potential bearish reversal day (contingent on Friday’s close being lower than Thursday’s close), that could open the door to a more significant drop over the coming days. The market is telling us that it no longer wants to continue with the current trend after failing to establish fresh highs, which forces a pullback and triggers stop-losses below Thursday’s low to provide added confirmation and likely spark additional profit taking on longs along with fresh sell interest.
