The NZD/USD pair try to rally during the session on Friday, and although we did keep some of the gains, what’s more important is that we fell back below the 0.84 level. The 0.84 level is very important to me because it has been the top of the reason consolidation in this market. The fact that we formed a shooting star only reiterates to me how difficult is going to be to break out higher. Remember, the New Zealand dollar is highly correlated to commodities, so we need a bit of a “risk on” type of environment for this pair to do well.
Because of this, I believe that the shooting star could signify that we are getting ready to have a little bit of a pullback. However, below at the 0.8250 level I see that the market found a bit of support. Quite frankly, when you see this in a consolidation area, it often means that one side is starting to take the upper hand. If that’s the case, I suspect that we will ultimately break higher. However, I am not confident enough in that to start placing trades quite yet.
When a shooting star candle becomes bullish.
There are times when a shooting star candle can become very bullish. Rather, I should say that if you break the top of that shooting star candle, that’s rather bullish. That is the one scenario which I could see buying this pair because it would show that we not only closed above the 0.84 level which of course is bullish, but we also broke the top of the resistance that kept the market down on Friday. While there is no such thing as a “sure bet”, having both of those things happen at the same time is indeed a very strong sign.
Regardless, if we break the top of the shooting star, I believe it is a sell signal, but only for short-term trades. I fully expect to see choppy conditions in this pair continued, as we simply try to figure out which direction the commodity markets in general need to go.
