A recent bullish breakout above the downtrend line took place on May 22. Since then, the market has been bullish as depicted on the chart.
This resulted in a quick bullish advance towards next price zones around 0.7150-0.7230 (Key-Zone) and 0.7310-0.7380 which was temporarily breached to the upside.
Recent bearish pullback was executed towards the price zone of 0.7310-0.7380 (newly-established demand-zone) which failed to offer enough bullish support for the NZD/USD pair.
Re-consolidation below the price level of 0.7300 enhanced the bearish side of the market. This brought the NZD/USD pair again towards 0.7230-0.7150 (Key-Zone) which failed to pause the ongoing bearish momentum.
An atypical Head and Shoulders pattern was expressed on the depicted chart which initiated bearish reversal.
As expected, the price level of 0.7050 failed to offer enough bullish support for the NZD/USD pair. That’s why, further bearish decline was expected towards 0.6800 (Reversal pattern bearish target).
Evident signs of bullish recovery was expressed around the recent low (0.6780). That’s why, a bullish pullback is expected towards 0.7050.
Moreover, further bullish advance should be expected towards 0.7250 if the current bullish momentum is maintained above the key-level of 0.7150.
The current price zone of 0.7140-0.7250 is considered a prominent Supply-Zone to be watched for SELL positions if enough bearish rejection is expressed on a daily basis.
On the other hand, the price zone of 0.7050-0.6980 has turned to be a newly-established demand zone to be watched for BUY entries if any bearish pullback occurs.
Conservative traders should wait for daily closure below the price level of 0.7140 as a valid SELL signal. Initial T/P levels should be located at 0.7050 and 0.6980.
The material has been provided by InstaForex Company – www.instaforex.com