“There is still some room for NZDUSD to reach 0.8850 – 0.8900, but if this happens, it should not be taken as a bullish signal.” It was June 30th, when we said that in an article, called “NZDUSD approaching a major resistance”. Well, the resistance turned out to be even stronger, since the NZD USD exchange rate reached only 0.8834 and then crashed to as low as 0.8308. After this decline of more than 500 pips maybe it is time for the bears to take a rest. As always, we will apply the Elliott Wave Principle to a price chart, in order to determine the most probable future market development.
On the 4-hour chart of the NZDUSD currency pair we are able to count a five-wave impulse to the downside with an ending diagonal in the position of wave (5). According to the Wave Principle, every five waves are followed by a three-wave correction in the opposite direction. In other words, chances are good that the bulls could return for a while. If this is the correct count, we may expect prices between 0.85 and 0.86 from now on, as long as 0.8308 stays untouched.