There is no trading signal here yet, but once it will be triggered, we should receive a sweet long-term deal, with a target of hundreds of pips. This setup is present on the NZDUSD and for a legitimate signal we just need several pips.
Formation, which you can see marked with a yellow color is an inverse head and shoulders pattern. This is a strong bullish pattern, announcing a movement to the upside. One thing is missing here though – breakout of the blue neckline. Today, NZDUSD tried to jump above this resistance but without a success.
Apparently, we will have to wait a bit more. Another positive sign here is the breakout of the red down trendline, which was connecting lower highs since the end of July. Last but not least is the blue horizontal support. It is absolutely crucial here and shows us, that iH&S pattern did not emerge in a random place. The blue support comes from the long-term lows from 2015 – in theory, that is a sweet spot for a reversal, the best one on this pair.
To sum things up, as for now, we have to wait. In theory, the proper buy signal, will be triggered, when the price will break the blue neckline. Positive sentiment will be denied, once the price will come back below the red line but as for now, it is rather unlikely.
This article is written by Tomasz Wisniewski, a senior analyst at Alpari Research & Analysis