NZDUSD teetering after big break

Important days for NZDUSD here, which needs to confirm the recent move higher or risk being thrown back into the endless consolidation pattern of the last eighteen months.

I noted when NZDUSD broke higher recently through the huge triangle formation formation that has been forming since mid-2011, but since the break of two weeks ago, we’ve been in a consolidation period that needs to find support soon if we are to believe that the pair is headed higher.

On a fundamental basis, any fading in the QE trade or return of volatility could scotch the kiwi rally, something I am looking for on a longer term basis anyway as the currency’s valuation is stretched and I think complacency is dangerously high as we head into Q4. But I would be more comfortable with a downside view in NZDUSD on a technical basis if we see the pair work deeply back through the 0.8225/0.8200 level, which was the previous Q3 high and particularly if 0.8100 (the approximate current location of the downward sloping line of consolidation that broke on the way up) eventually falls. Note that the 40-week (200-day) moving average is coiling close to that latter level as well.

Stay tuned.