- NZD/USD is defying gravity and taking on the bears at critical monthly resistance.
- A break of 0.68 the figure puts the bulls in good stead for a cycle continuation to the upside.
NZD/USD has been a strong performer in 2020 and has soared from a low of 0.5469 to a fresh cycle high of 0.6778 today.
The rally today has broken a critical daily trendline resistance which would be expected to now act as a support on retests to the downside.
However, given the analysis of the market structure, there is still a bearish case until bulls conquer the monthly supply zone and break out above it.
The following illustrates both the monthly and daily scenarios which combined, could benefit swing traders weighing the prospects for higher grounds, encouraged by the latest move:
NZD/USD breakout
Bulls have burst through the old channel resistance that would now be expected to now act as a support.
However, from a longer-term perspective, bulls cannot claim victory until breaking the monthly resistance zone and supply area below 0.68 the figure:
As can be seen on the monthly chart above, there is the argument for a deeper retracement to complete a reverse head and shoulders (H&S) if the price falls below the 0.66 area.
In doing so, this will also complete a full 38.2% Fibonacci retracement of what had been five months of uninterrupted advances.
Additionally, NZD continues to show very overstretched net-long positioning when compared to its pro-cyclical peers which leave it vulnerable to a long squeeze from multi-top highs.
This could look something like the following, either in part or in full towards the completion of the reverse H&S.
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