False Breakout on the NZDUSD!Yesterday, we received data from the job market in New Zealand. Unemployment Rate rose higher than the analysts’ estimates. That is definitely a negative information for the NZD but the currency is suffering heavy losses since Monday.
In my opinion, the big contributor here is the technical situation with the Head and Shoulders pattern as a main player.
The reversal from the beginning of the week is a false breakout above the neckline of the big inverse head and shoulders pattern. NZDUSD loves this structure! The head of this is build from a smaller iH&S. What is more, the right shoulder had two H&S patterns inside. The last one is the false breakout mentioned above. As a technical analyst, I call this amazing. The sentiment here is negative.
Second one is the pair of two safe heavens, CHFJPY. Currently we are inside of a pennant, which is formed after the breakout of two major down trendlines. Bullish momentum seen recently is driven by the double bottom formation on the long-term chart. Currently, most traders wait. Price breaking the upper line of the pennant, will give us a signal to go long and price breaking the lower line, will give us a signal to go short.
Last one is Gold, where we are also inside of the sideways trend. The price did not manage to break the 1518 USD/oz resistance, which caused a proper drop. Now, we are testing the lower line of the rectangle. As long as we stay above, buyers can be optimistic but breakout to the downside will change the outlook to a negative one.
This article is written by Tomasz Wisniewski, Director of Research and Education at Axiory