NZD/USD Trading in a Triangle on Top of a Key Trendline

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NZD/USD Trading in a Triangle on Top of a Key Trendline

Triangle within Bearish Market: The 4H NZD/USD Chart shows a bearish market that is has been stalling since a low of 0.8423 last week. In the 4H chart, we can see a triangle pattern forming, but signs are overwhelmingly bearish from the technical perspective.
1) Price is trading below the 200-, 100-, and 50-period SMAs, which are sloping down and in bearish alignment.
2) The RSI has tagged below 30, even below 20, but has held below 60.

NZD/USD 4H Chart 8/11

nzdusd 8/11 4h chart

(click to enlarge)

The 4H chart shows a bearish inclination, suggesting price will uncoil to the downside.

Key Trendline Support and the Bearish Breakout Scenario: When you look at the daily chart, you can see that a bearish uncoiling will also be a bearish signal in the medium term, because it would break below a rising trendline that connects the August 2013 low of 0.7713 with the 2014-low of 0.8051 made in February. A break below the triangle will also break below the 200-day SMA, which is holding as support at the moment. The bearish outlook opens up the 61.8% retracement level at 0.8350, but we should start looking for buyers there especially as the RSI digs into the oversold area below 30.

NZD/USD Daily Chart 8/11
nzdusd daily chart 8/11

(click to enlarge)

Bullish Scenario:
If NZD/USD rallies above 0.85, it would break the triangle to the upside, and also clear the a couple of falling trendliens, adn the 50-period SMA in the 4H chart.This first opens up a pivot around 0.8530. If a subsequent pullback holds above the the 0.8460 area, it would show respect to the triangle as support, and suggest further bullish correction, with the 0.8650 area in sight. We can see that the 200-period SMA and a previous support pivot reside around 0.8650. On the daily chart, you can also see that if price breaks above 0.8650, it would clear back above the 100- and 50-day SMAs, which would revive the uptrend, especially if that rising trendline support – being tested now – holds.

To contact the reporter of this story, email Fan Yang at fan@forexminute.com
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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.