NZD/USD Daily Chart

10/01/2008 4:19 pm EST

Focus: FOREX

chart

(Price on 1st pane, Slow Stochastics on 2nd pane; uptrend line in green; downtrend lines in red; horizontal support/resistance level in yellow; 200-period simple moving average in light blue.)

Price action on the NZD/USD daily chart, as shown, has bounced up off of a significant downtrend line (marked “A”) in what appears to be a pullback move after price broke out above the line on 9/19/2008 and subsequently reached up to a key 38.2% Fibonacci retracement level.

This breakout-pullback formation could be hinting at a possible continuation to the upside in the direction of the original break. To confirm such a move would necessitate a breakout above the swing high that was reached after breakout, around the 0.6950 level. This price level also serves as the next key resistance to the upside if price carries further bullish momentum going forward.

On the downside, the aforementioned downtrend line should continue to serve as support where it originally acted as resistance before breakout. Further strong support resides around the key 0.6440 historical support/resistance level.

By James Chen, Chief Technical Analyst, FX Solutions

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