The NZD/USD pair had another positive session on Wednesday, continuing to press up against the top of the recent consolidation area with the barrier being based upon the 0.85 level. I see this area as a major point of contention in this currency pair, and if we can get above it this would mean big things indeed.
We look at the longer-term charts; you can see that there has been consolidation between 0.75 and 0.85 over the last several months. Because of this, if we managed to break above the 0.85 level, this would be a significant breakout and could lead a bullish movement of 1000 pips going forward.
While this may seem a bit unrealistic, I am reminded of when the Australian dollar reached 0.80 to the US dollar. There were a lot of people back then that seemed to think that the Aussie couldn't get above that barrier. After all, it was the high that had been put in place 16 years previously, and had not been seriously challenged since. However, as you know the Australian dollar not only broke that barrier, but broke the parity level as well. When you think of the New Zealand dollar, it is difficult to imagine it as being almost equal to the US dollar, but in reality you can make a case for it being somewhat undervalued is the Australian dollar is valued presently at roughly 1.03 to the US dollar.
Imminent breakout?
I personally believe that the breakout will happen, and the fact that the Kiwi dollar has moved so quickly to the upside over the last couple of sessions will not have mattered much. After all, if you look at the longer-term movements of this pair, it will go sideways for a great length of time, and then suddenly shoot up or down drastically.
Another thing that has me thinking that this pair is going to breakout relatively soon is the fact that you can see the lows are getting higher over time. It isn't quite a perfectly shaped pattern, but you can almost make a case for and ascending triangle. With that being said, on a daily close above that 0.85 level, I am buying this pair and holding on.