It has been nearly two and a half months since we published “NZDUSD Getting Ready to Launch?”. On January 18th, 2016, the New Zealand dollar was trading around 0.6460 against the U.S. dollar. The pair has been in a sharp downtrend since mid-2014, so any bearish expectations were reasonable. However, the charts were sending the bears a warning sign, the majority of them probably did not notice. We did. The chart below shows what it was.
The 4-hour chart of NZDUSD was showing a clear five-wave impulse to the north between 0.6235 and 0.6896, followed by a larger A-B-C zig-zag correction. According to the Elliott Wave Principle, after every 5-3 wave cycle, such as this one, prices continue in the direction of the impulsive sequence. That was all the evidence we needed to form a bullish stance on NZDUSD back in January and say that as long as 0.6235 holds, the bulls are likely to aim at 0.6900. Those of you, who have been following this pair, know how the situation developed. The next chart will visualize it for the rest.
Soon after the forecast was published, NZDUSD fell to a new swing low near 0.6350. However, the invalidation level at 0.6235 was still far away, so the bullish scenario remained valid. Then the bulls came back to fight their way up. It was not easy. They had to deal with several sell-offs of more than 200 pips since the start of February, but eventually, the target of 0.6900 was reached and exceeded.
The Wave principle’s ability to help traders and investors predict reversals is probably its best characteristic. In this case, it not only warned us about the return of the bulls, but also provided a specific invalidation level and a target, thus making the trade depend entirely on patience… or the lack of it. Higher levels could still be expected in NZDUSD from now on.
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