ForexPros Daily Analysis June 29, 2011


Possible Descending Channel in NZD/USD

With the financial world focusing on Greece, it is of no surprise that the European currencies are among the most volatile now. The Euro responds sharply to every news release, while the Swiss Franc keeps making new all time highs against other majors, just as the Australian Dollar used to do only few weeks ago.

Away from the headlines, the New Zealand Dollar has settled down into a trading range. This currency made an all time high against the US Dollar in early July, at 0.8303, but has pulled back since, dropping to 0.7971. That top, even if temporary, was nicely marked by divergences between the price and the technical indicators.

For a while, this pullback in the NZD/USD gave an appearance of a flag, a continuation pattern, suggesting the resumption on the uptrend. However, by now, the price has formed a descending channel, which changes the sentiment from bullish to bearish, at least in the short term.

So far, this channel has four contact points with the price, a minimum number needed to establish this pattern. If another one forms, this channel will become even more significant, and likely to guide the NZD/USD even lower. This formation does not provide objective of how low the price might get, but it is a valuable tool to help determine the marketís direction.

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Forex Trading analysis written by Mike Kulej for Forexpros.

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