NZDUSD exceeded the 0.7000 mark last week. The pair has been recovering for the last four months, which led it to 0.7053. It has been a good run for the bulls, but there are signs, which show the bears are yet to say their final word. The Elliott Wave Principle is a forecasting method, based on pattern recognition. Let’s apply it to the 4-hour chart of NZDUSD and see what the market is likely to do next.
Starting from the bottom at 0.6235 and traveling to the top at 0.7053, NZDUSD seems to have drawn a textbook zig-zag correction, where wave (A) is a regular five-wave impulse, wave (B) is a smaller zig-zag pattern, labeled A-B-C, and wave (C) is an ending diagonal. The entire pattern has developed between the parallel lines of a corrective channel, whose upper line caused a decline to 0.6834 so far. According to Ralph Nelson Elliott, ending diagonals are followed by a “swift and sharp reversal”.
Corrections are usually fully retraced, when the larger trend resumes. In NZDUSD’s case, this is a three-wave recovery within a bigger downtrend. So, if this is the correct count, NZDUSD should continue to the south. As long as 0.7054 holds, the pair could be expected to plunge below 0.6235. In our opinion, this is not the time to “buy the dip”.
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