It’s like someone is pushing the snooze button for the forex markets. Currency volatility continues to decline, and researchers’ interest in EURUSD may soon return to the same multi-year lows we saw before the coronavirus crisis. However, things could change and the NZDUSD seems to be leading the way.
Global Google Search Interest in EURUSD over the Past Five Years
The New Zealand dollar against the US dollar has curled over the past two months in a large bearish descending triangle, and this follows the fall from a smaller configuration I spoke about in June. The June setup suggested that the NZDUSD could go down 180 pips, a target we hit, while today’s setup suggests that the NZDUSD could trade lower by 392 pips.
Triangular descending pattern
In order for the market to form a descending triangle, the price must rebound from a horizontal support level. This level, in the NZDUSD, is the level of 0.6913. The price rebounded from or near that level this week, last week, June 18 and March 2021.
The next ingredient is the downward sloping trendline, and we find such a line connecting the highs of 2021 and May 2021. Subtracting the difference between the high of May 2021 and the horizontal support level of the high. Last week’s low suggests NZDUSD may drop to 0.6522.
To add to the bearish bias, since June 18th the price has formed a bearish rectangular pattern, and this pattern suggests a decline to 0.6735. Therefore, short and long term traders are likely to see the value of shorting the NZDUSD when breaking last week’s low.