NZD/USD was bearish to start the month, falling to a new low on the year at 0.7660. Since then, it made a relatively sharp pullback to 0.7975. Then it entered a choppy consolidation. It appears to display some conventional elliott wave structure.
The 4H chart shows that during this choppy consolidation, price has reached down below the 200-, 100-, and 50-period SMAs to 07765, and the RSI has tagged 30, barely. This bearish bias however was brief as price rebounded this week, especially during the 11/26 session.
Now, NZD/USD is at the crossroad.A break above 0.79 with the RSI pushing above 60 should revive some bullish bias and suggest another bullish swing.
Structure: Note that the rally from 0.7660 up to 0.7975 was in an impulse manner: 1-2-3-4-5. The decline so far has been in a corrective structure: a-b-c. A break above the current consolidation structure thus suggests another 1-2-3-4-5 impulse wave structure upwards. If we get a pullback after a breakout, and we see NZD/USD make a higher low, preferably above the 0.78 level, then we would have more evidence that the market is entering another bullish swing.
Now, if we do get this second upswing, what can we expect afterwards?
Expanded Flat? The daily chart shows that the market has been choppy since October. Now, an upswing could very much be part of an expanding flat (Elliott Wave terminology). In terms of a count, that means we have completed A-B and is about to embark on a C wave. The conventional EW count for an expanded flat would be ABCDE, so there are still a few more waves in the upcoming months to complete this theoretical consolidation structure. OR, the market is bearish and will continue the bearish trend after November’s abc correction.
In both scenarios, we should expect resistance when price gets into the 0.8050-0.8080 area, after the current abc rally, especially if we see a bearish divergence with the RSI. The consolidation outlook suggests we should limit the subsequent bearish outlook to be within a sideways context (respect consolidation support levels around 0.77). The bearish continuation outlook suggests holding short positions, or at most scaling out at consolidation support levels around 0.77.
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