Forex Technical Update July 6, 2010  NZD/USD: Stalking an AB=CD Retracement Pattern   

  • Daily: In the daily chart above, I will start by pointing out a sharp decline after the market reached the 0.8150 area. This was just below 78.6% retracement level, and the declining channel resistance.
  • It was testing the 200-day simple moving average, which proved to be resistance. This occurred as the MA was flattening from a period of incline, which was brought about by the 2009 rally.
  • The RSI also topped off near 60, a sign that bears are in control in the intermediate term.
  • The intermediate term looks bearish, but the short-term strong price action suggests there is a bullish attemp. The 4H chart should help stalk the current price action around 0.69.

  • 4H: There is a possible Gartley, or AB=CD retracement pattern developing, although price action is indicative of a strong bullish push. The bounce from 0.68 (61.8% retracement of a previous rally) has been strong.
  • The only thing keeping me in a bearish outlook is the previous sharp decline after a triple top.
  • The retracement pattern is projected to the 0.70 level, just below 61.8% retracement level.
  • Look for topping here, or perhaps even just a bit above 61.8% retracement. If there is topping here, we can see another decline towards the 0.66 double bottom low seen in the daily chart.
  • But again, I want to emphasize the concern of the price action, so I am really looking for topping and some strong bearish action to gain more confidence in this outlook. In the 1H chart, it looks like maybe the second upswing we are seeing now has completed a 5-wave (3 swing) impulse wave. This means, the next topping action is expected to be followed by a decline.

  Fan Yang Currency Analyst Commodity Trading Advisor

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