Bearish Engulfing on the Kiwi

Four days ago we wrote an analysis about Gold, where we anticipated that this precious metal will go higher in the next few days. We can see that this week started with an upswing and our scenario looks promising. In today’s analysis we will write about a nice bearish setup on the NZDUSD and hopefully, we will be able to comment on this later, when Kiwi will make new lows.

Our negative outlook for NZDUSD is based on the fact that on a daily chart, the price created a bearish engulfing pattern – the candle from Friday overlaps this one from the day before. Candlestick formation itself can easily be a trigger to open new position but is also would be welcomed if that would be supported by other factors. So to this, we can add the fact that this formation was created exactly on the lower line of the flag (blue), which was a support for a long time and now is a local resistance. What is more, the price is still making lower lows and lower highs, which is essential for every healthy downtrend.

There is only one thing that I am missing here – today the price is going up, so it seems like traders are now ignoring this candlestick pattern from 5^th and 6^th of January. We will see, how the situation will develop but as long as the price stays below Friday maximums, odds for a downswing are much higher. If you are also concerned about the fact that the price is not going lower today but in the same time you are bearish, you can think about a pending order below Friday lows, which seems like a reasonable option in the current situation.

This article is written by Tomasz Wisniewski, a senior analyst at Alpari Research & Analysis