By: Mike Kulej
Recently, the New Zealand Dollar-Swiss Franc cross has, very quietly, sprang back to life. Following the epic sell off in 2008, it rebounded sharply the next year, but then settled into a consolidation, which lasted several months.
Over time, that consolidation assumed a shape of a Head and Shoulders reversal pattern, spanning a little over 1000 pips. Its size is very much in line with the magnitude of preceding moves, which were correspondingly larger on this long-term chart. Now this pattern appears to be complete.
Taking a Closer Look
Its neckline, which provided a support within this formation, was at 0.7075. The price dipped under that level a few weeks ago, but failed to close under it. Recently, during another attempt, the NZD-CHF broke through and stayed under the neckline, which confirmed a trend reversal.
Other technical indicators also confirm the new bearish trend. The MACD is under the neutral (zero) line and moving lower. At the same time, the ADX is starting to rise, suggesting a developing trend. If the size of the Head and Shoulders is used for a guide, the NZD-CHF could drop about 1000 pips over time, as long as it stays under the new main trendline.