Forex Technical Update

Prev: NZD/USD in a Bearish Continuation after an ABC Correction (8/10)

NZD/USD 8/12/2011 1H Chart
Negative Reversal and Bearish Targets
- The NZD/USD completed a Gartley 8/9 and a sharp sell-off followed. However that sell-off did not materialize in a bearish continuation. Instead, it was just a "bear-trap" ahead of further consolidation.
- This next phase of consolidation has so far rallied in a 3-wave manner, or ABC structure. With C=A, this is a completed Gartley as well.
- Note also that this was completed at a fibonacci retracement level of 78.6%.
- The pivot for the latest upswing started from 0.8175. Let's see if the top will miss the former top at 0.8328.
- A bearish outlook to 0.8060 starts with a  break back below 0.8220, and further confirmed with a break below the 0.8175 level.
Elliott Wave Count:
- Looking at the 4H chart, we see that swing projections target 0.80 and 0.79. The ability to break below 0.80 will suggest that we indeed have a bearish continuation. A conservative bearish target would then be around 0.7770 (61.8% retracement seen in the daily chart).
- However, if the market breaks above 0.8335, we might not be done with the consolidation, and the bearish continuation is on hold, but not invalid.
- A break above 0.85 would make the case for bearish continuation a lot weaker, and a bullish attempt towards 0.8840 should be considered especially if support is found above or around 0.84.
- If the continuing consolidation scenario stops at 0.85, it would complete a double 3 correction back to a fibonacci retracement level, so this would be another area that invites bearish attempts.
- Finally, if the RSI reading in both 4H and 1H charts fall below 40 (most likely 1H reading first), we have a better chance of a bearish continuation as the bearish momentum would be maintained.
NZD/USD 8/12/2011 4H Chart

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Fan Yang CMT
Chief Technical Strategist