The NZDSGD has experienced some considerable volatility so far this week, and the trend looks set to continue as the pair completes a double top pattern during the Wednesday US morning session.
The New Zealand dollar had gained strength throughout the latter half of last week to reach highs of 1.0878. The level served up some resistance, and catalyzed a correction to Monday support at 1.0835. A downside Bollinger break hinted at a mean reversion, which proved to be the case as the uptrend resumed and the NZDSGD once again reached aforementioned highs on Wednesday. However, a failed retest of these highs has seen a sharp downside break, and the NZDSGD formed, and completed, a double top pattern with a close below the neckline at 1.0835.
The pattern validation offers an initial downside target somewhere in the region of Friday support, at 1.0795. However, the overall trend remains bullish, and a sharp rally subsequent to the neckline break suggests there may be some sense in a multi target approach. If the pair can close below the neckline as we head into the US afternoon, look for an initial downside target at 1.0823. Beyond that, look for a close below 1.0815 to validate the aforementioned traditional pattern target.
Bear in mind that the sharp rally that followed the neckline break may hint at an upside correction before the pattern takes hold. There may even be the potential for a triple top pattern, depending on the strength of the bullish momentum. Look for a close above the Bollinger Band central MA to validate an upside target of the aforementioned pattern highs at 1.0878. A failed retest of these highs would form a triple top pattern, again offering up a strong technical bearish bias.
To contact the reporter of this story; Samuel Rae at Samuel@forexminute.com