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NZDUSD has hit a high volume level of resistance, but what is the best way to trade the level?
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Today, we’re going over a position on NZD/USD, why I’ve taken this position, and what I’m expecting to happen next.
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Weekly timeframe
I’m just going to start off with the weekly timeframe. Last week, we saw a nice little change in the weekly candlestick bias. What I mean by that is that we’ve been bullish for the past four weeks, and last week, we had a reversal.
Now that the price broke through the weekly low, that usually means that it will follow that direction to the downside. The price broke the weekly high, moved to the upside, broke the weekly high, moved to the upside, then broke the weekly high.
The only exception is when we go to those key support and resistance levels where the price found resistance at 7230-7240. This is the potential area where a neckline of the head and shoulders pattern could form.
The NZD/USD weekly timeframe is giving us clues as to what could happen next. The weekly closed bearish off the key resistance zone of 0.7240 and it’s showing a potential head and shoulders pattern neckline rejection. This, combined with the break of last week’s low suggests that the market could be in for a sell-off.
But, this could reject that head and shoulders pattern. So, I looked at the daily candlesticks for bearish ones.
Four-hour timeframe
The reason why I like to look at bearish candlesticks is that usually, that means that the four-hour timeframe is in a little bit of trend, and we can see on this four-hour timeframe that price is starting to make lower lows and lower highs.
The four-hour timeframe is confirming the bearish bias as it is forming lower lows and lower highs. When the 4hr is trending like this, it is a strong indication that the price will move lower.
After hitting that resistance level, we got nice lower lows and lower highs. Within this area, the most traded level is 71.68. That means that it could act as a resistance level moving forward.
So, I looked for a sell order there and I’m expecting the market to continue its trend to the downside.
Although, it could pop up higher still. We have a supply zone where the sellers entered. It could go up higher towards 71.94 or 72.
My target is actually within this consolidation zone because the high volume level at 7032 has not been tested.
Within the current retracement phase, we can see a high volume level of 0.7168. This will likely act as resistance. We can trade this by using a limit order or if the price changes cycle on a lower timeframe. The target for this trade is 0.7032. This is a high volume level of the consolidation that is untested. This point of control could act as a magnet for price.
Now, just because I’m targeting that level, it doesn’t mean that I’m going to hold the trade all the way to that point. As the price moves down, I’ll be managing my stop losses as the price makes lower lows.
So, keep an eye on NZD/USD. This is the opportunity that I saw, so I’m looking for a short potential on 7032.
We hope our Forex Chart of the Day analysis helps you in your trades. Practice trading the NZD/AUD pair with free $50,000 funding when you sign up for a free demo account.
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