Search ForexCrunch
  • NZD/USD is work in progress in terms of a monthly reverse Head & Shoulders pattern in the making.
  • The following is a workflow of trading the development of the pattern on a swing trading playbook.

Developing Story…

In yesterday’s macro and technical analysis article, it was explained that ”while it appears to be a bearish fundamental environment for the kiwi, it could be short-lived according to the following technical analysis…

That article can be found, here: NZD/USD bears leaving the building towards daily structure

The purpose of this article is to illustrate how the swing trading analysis, from a market structure perspective, has continued to offer accurate entries and targets since the developing story commenced, here: NZD/USD Price Analysis: Bearish opportunities below current resistance

For a quick catch-up, NZD/USD has been covered since the wave 2 opportunity in the following charts:

Daily chart & 4 HR entry 

Update 7/9/2020 

Update 8/9/2020

12 pips from the target, looking for bullish wave 3 development.

Update 9/9/2020

As can be seen, the price target was achieved in Wave 2 as follows:

Wave 3 is now in development and the 4HR chart should be monitored for a bullish environment and the entry conditions of the swing trade strategy. 

Wave 3 analysis

What should now be expected is a retest of resistance and then a continuation to the downside. If we recall, the monthly chart could be painting a reverse Head & Shoulders as follows:

In this case, therefore, we need to be monitoring for where Wave 3 might find resistance prior to entering short again. 

As can be seen, the price has already made a 38.2% retracement and had met a resistance structure that would be expected to hold the first test.

This gives rise to a short term long opportunity on a pullback.

The upside target is either a 50% mean reversion of a 61.8% Fibonacci retracement.

Ultimately, the prior bullish closing, marked in purple, (the only green candle in the downtrend) will offer ultimate resistance and this is where bears will be monitoring for short setups. 

Such a move will be filling the wick on the weekly chart:

Monitoring for 4HR long setup

The conditions are far from appropriate for a long position.

 However, should the there be a period of deceleration for the 21 EMA to cross below the price and the MACD move above zero, then the following parameters are where a 1:2 setup would coexist with a bullish environment: