NZDCAD Technical analysis: Inverse Head and Shoulder could spike 300-pip rally

The Kiwi/ Loonie (NZD/CAD) pair is one that currently shows a lot of upside momentum. From the monthly chart, down to the 4 hour chart, the bullish momentum is evident. Due to the fractal nature of the markets, a similar pattern found on the daily chart is evident on the monthly chart also. NZDCAD Technical analysis will show possible entry and exit levels.

2 May, AtoZForexNZDCAD has been gradually building upside momentum for weeks. The 3 week sell off on the pair in February only proved to give the bulls a better entry level. As soon as the 0.9200 key support level was tested three weeks ago, price spiked aggressively towards the 0.9500 resistance. The brief dip last week due to a weak NZD has already been covered as bulls have moved price above last week's high.

On the daily chart, price is about to complete an inverse head and shoulder formation. At the breakout of the neckline, a further rally is expected.

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NZDCAD Technical analysis NZDCAD Technical analysis: D1 Chart (click to zoom)

The first time NZDCAD traded at 0.9200 low was early January. Once price hit that level, aggressive bulls reappeared and shot price 430 pips to the 2017 high at 0.9652. Price retested the 0.9200 again in March and once again, the bulls appeared and have remained dominant since then.

NZDCAD Technical analysis: 430 pip rally looms

The neckline of the inverse head and shoulder is the 0.9500 resistance. At a close above that level, price should begin a rally towards 0.9850/ 0.9900, which is the 2016 high. That level, the highest level in almost two decades was first tested in November 2016. On that occasion, price crashed 700 pips following the high made at the 0.9900 key level resistance.

With the current bullish momentum, price may retest that 0.9900 high again in the coming weeks. The weekly chart also bounced off a key support and is tending towards the upper limit of a channel.

NZDCAD Technical analysis NZDCAD Technical analysis: W1 Chart (click to zoom)

Also note the bullish MACD divergence which shows upside momentum. Interestingly, the monthly chart is also at the brink of a breakout of an inverse head and shoulder pattern. The pattern, which took all of 3 years to form has its neckline at 0.9589.

NZDCAD Technical analysis NZDCAD Technical analysis: M1 Chart (click to zoom)

If price breaks the neckline of the monthly chart inverse head and shoulder, price may hit parity level and beyond.

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