- NZD/USD posting a head-and-shoulders pattern
- Triggering the neckline will be key to the outlook
NZD/USD is in the process of forming a head-and-shoulders (H&S) pattern on the daily time-frame. The left shoulder formed in late July, the head (two heads) in September, and it looks like this month we may have the right shoulder. But not just yet.
To count the pattern as valid we will need to see price roll down below the neckline running over from August. A close below the neckline should kick off a decline towards the 200-day at 6389 first, followed by lower prices after. The measured move target, based on the height of the formation, points to ~6250.
There isn’t any meaningful support at that juncture, leaving room for even more losses. The first level of support from a price standpoint arrives around the 6150 mark. This leaves ample room for traders taking swing trades and/or looking to take shorter-term trades from the short-side along the path of least resistance.
Again, though, the neckline is viewed as a source of support until broken. It could hold and a broader range/wedge pattern could also come to fruition. On a break, stops should be set sufficiently above the neckline in the event of a retest soon after.
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NZD/USD Daily Chart (H&S pattern forming)
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—Written by Paul Robinson, Market Analyst
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