The New Zealand dollar versus the Canadian dollar currency pair is revisiting a very important support area. Will the bears succeed this time?
After it peaked at 0.8799, the price went beneath the old weekly support of 0.8692, thus giving a sign that the bulls overextended and that it’s the bears’ turn to ride the market.
And a bearish profile indeed came into being, as the price dropped, reaching the 0.8351 low, which is very close to the weekly support of 0.8344.
On February 24, there was a strong bullish attempt to limit further bearish advancement, but the following days seem to have been drawn by the bears, themselves aiming to invalidate any bullish opportunities.
So, one possible scenario is to see the price falsely piercing the 0.8344 weekly support level. If this happens, then it can be said that a clear bullish signature has been sealed and as a consequence, the bears have to take a step backward.
Another scenario is the one in which the price oscillates above the same 0.8344 level, preferably without taking out (forming a lower low) 0.8351, and then makes a strong move towards the north. This would also be a sign of bullish strength.
For both these bullish scenarios, the target is represented by the level of 0.8514. Only if the bears achieve to pierce and confirm 0.8344 as resistance, then they may hope for reaching the previous low of 0.8236.
The price is in a downward movement, oscillating around the 0.8417 level. The last portion of the chart seems to form a pattern that may very well end up as being a pennant or a double bottom.
Because their outcome is significantly different, it is very important to distinguish which one of them it is actually unfolding on the chart.
In this regard, the trendline might come to aid, as the reaction of the price concerning it has a high chance of hinting the direction. In other words, if the price pierces it and then confirms the 0.8417 level as support, then it means that the pattern was a double bottom — or that the pennant failed — and as a result, 0.8516 is the next target.
On the other hand, if the price confirms the double resistance made possible by the trendline and the 0.8417 level, then it may be considered that the continuation pattern — the pennant — materialized and it is conducting its mission, which is driving the price at 0.8307.
Levels to keep an eye on:
D1: 0.8344 0.8514 and the low of 0.8236
H4: 0.8417 0.8516 0.8307
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