NZDUSD continues to move higher in line with strength and weakness and retail sentiment but where are the key supply zones to be aware of?
The seasonal period of weakness for the USD ends soon which could offer reversal opportunities on the major currency pairs.
Watch the video to learn more…
Today, we’ll talk about NZD/USD and what could happen to the currency pair this week.
We saw the NZD/USD rally back, and now, the bullishness came back for this pair, according to the strength and weakness chart.
The US Dollar continues to fall throughout the seasonal period of April, and the NZ Dollar continues to rally. That is why we are getting a nice uptrend on Kiwi.
I like the idea of continuing to look for long opportunities. However, there comes a point where we have to look at these key supply and demand zones and say: where would the price most likely find a resistance level and potentially move the other way?
The reason why we could be looking for a supply zone is because of the seasonality of USD in April. However, the US Dollar performs at its best in May.
That flip in USD is what could lead to some major currency pairs to change their trends.
We have a bullish signal in NZD/USD. That is what it is suggesting to us because 62% of retail traders are currently short
They’re trying to get short around these areas, and since yesterday, they’ve increased their short positions by 11%. That tells me that they still want to add in short positions at this point. So, where are we likely to find resistance?
NZD/USD continues to move higher as the USD weakens in line with the seasonal bias. However, is this going to end? And if so, where will the price reverse?
Seasonally, throughout the month of May, the USD weakness reverses and outperforms all currencies. May is typically the best month for the USD and the worst for currencies like the NZ Dollar. So, we need to identify the supply zones in the market to look for a seasonal position.
The price will still likely move higher due to the retail sentiment report highlighting that retail traders are adding short positions at the highs. This should lead to another move higher.
There’s a really nice supply zone in the daily timeframe. This is a nice supply zone because buyers have turned into aggressive sellers at this point.
There are no real levels here, it’s just pressure. The buyers turned to sellers at this point.
If the price were to go up to 0.7400, that would be a great area to look for long-term short opportunities in the markets.
Looking at the daily timeframe, the previous selling pressure came at 0.7400. This would be a good area to look for further short opportunities as the institutions have driven price significantly from here.
If I had to go down to a lower timeframe, though, there are still some blocks where we may see some resistance come through. We can refine those levels from the four-hour timeframe.
The first area that I like to look at is where buyers turned to sellers quite aggressively at these points.
We know that because we talked about a volume level at 7252 in the previous video. When we look at the market, we can see that there’s a consolidation, then a breakout to the downside. The price went back up to a high volume level, reacted, then sellers came back into the market.
Now, if the price were to go up back to this level, we could see a potential breakdown in the price of Kiwi because this is where aggressive sellers were sitting last time.
Going down into the 4-hour timeframe, the trend is making higher highs and higher lows, and the market is currently bullish. However, it is approaching the level of 0.7250 where we saw significant selling pressure from the high volume level. This could lead to another selling reaction on this timeframe.
We have a key support zone. I would look for the potential of the price to come back up to this area and see a short term sell-off.
We may not see the complete sell-off because of the huge supply zone but we may see an initial reaction to this area. We need to be aware that there is a resistance area there.
If the price breaks down from this point and then breaks back, then we know that we are heading towards this supply zone in the highs.
Alternatively, if the price breaks above the high volume supply zone at 0.7520, then we could see another rally from NZD/USD towards the larger area of 0.7400.
Keep an eye on the key price action around these levels to see what may happen next.
So, there are a couple of areas to keep your eye on. The immediate area is around 7250. It could act as a short-term resistance in line with the high volume area.
We may not get the move as we did before, but we may see an initial reaction from that area. If the price breaks through that high, then we may look for the higher supply zone around 0.74.
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