NZD is coming back from a long trip
Past few months for the NZDUSD were pretty rough. Since the tops in July, the price declined almost 800 pips and in the middle of November made the new yearly lows. Since that, we are slowly recovering and actually, we can see a light in the tunnel. Luckily it will not be a train and the buyers will not get smashed again.
The current situation looks promising for the buyers. That is true, we are near the long-term lows and the NZD was hit badly in the past few months but the price movements that we can observe now, look more like a reversal situation rather than a continuation. First of all, sellers failed to hold the price below the horizontal resistance on the 0.682 (orange), which makes this breakout a false one. What is more, the price is now creating an iH&S, which is a bullish pattern (but for the buy signal we need to wait for the breakout of the upper green line). In addition to that, two daily candles, from Thursday and Friday, created a bullish engulfing pattern. That is a significant buy signal strengthened in the same time by the fact that it happened on the 0.682, which shows us a defense of the support.
As long as the price stays above the 0.682, the sentiment is positive and we should see the NZD gaining strength against the USD. That is our base scenario for this instrument. Comeback below this level will deny the iH&S pattern and should be considered as a definite negative sign for the buyers but currently, this option is less probable.
This article is written by Tomasz Wisniewski, a senior analyst at Alpari Research & Analysis