Those of you, who have read “NZDUSD Approaching A Major Resistance”, know that we have been bearish on NZDUSD for a long time now. However, we would not be bearish forever. Now seems to be a good time to reassess the situation and see if we could find some early signs of a probable reversal. The chart below comes in handy.
As visible, the decline which has been in progress since the top of 0.7745, is a five-wave impulse. You can even see the sub-waves of the third wave. But the Elliott Wave Principle postulates that every impulse is followed by a correction in the opposite direction. In addition, the Relative Strength Index is showing a bullish divergence between waves 3 and 5. That is why we assume NZDUSD is on the verge of a bullish reversal. It can go for the minimum of three waves to the upside or turn out to be an even larger recovery. In both cases, the bears should be very careful.