The NZD/USD currency pair has recently pulled back up to the neckline of a topping pattern, despite making a new low on June 28. This move could potentially invalidate the pattern and indicate a possible upside reversal in the near future. The pair has been trading within a complex multi-peak topping pattern since the middle of May, and has now recovered back up to test the neckline for the second time.
On the 4-hour chart, NZD/USD first broke below the neckline on June 26, reaching a low of 0.6068 before quickly rebounding. The pair then fell to a new low of 0.6057 on June 28, only to recover once again to the level of the neckline. This recovery, known as a “throwback” move in technical terms, is unusual and suggests that the downside momentum may be waning. This raises the possibility that the initial break lower was a false move and the pair could now rally back above the neckline.
A bearish Shooting Star Japanese candlestick pattern was completed during the last 4-hour period, indicating a potential reversal. However, further confirmation would be needed with another bearish candle. A break below the June 28 low at 0.6057 would confirm further downside, with the next target in a zone between 0.6028 and 0.6015. Conversely, a break above the 0.6108 highs on a closing basis could cast doubt on the bearish hypothesis and signal a possible recovery. A move above 0.6149 would invalidate the bearish pattern and possibly signal the beginning of a new short-term uptrend.
In conclusion, the NZD/USD pair’s recent movement back up to the neckline of a topping pattern suggests a potential shift in momentum that may lead to an upside reversal. Traders should keep a close eye on key levels such as 0.6057 and 0.6108 for further confirmation of the pair’s future direction. The completion of a bearish candlestick pattern and subsequent price action will be crucial in determining whether the pair will continue its downward trajectory or begin a new uptrend.
