It forms a bearish candlestick at the top of the range

• NZD/USD formed a bearish reversal candle at its highs and turned lower.
• This suggests the possibility that it is about to move down to the lows of the range.
• The pair may enter a sideways trend, with odds favoring a range extension.

NZD/USD may be entering a sideways trend after reaching the top of a multi-week range and passing. If it is in a sideways trend and considering “the trend is your friend”, it is more likely to continue to oscillate within the range.

NZD/USD rose to a high of 0.6248 on August 20 before falling again just as quickly. The rapid price change led to the formation of a Japanese Gravestone Doji candlestick (circled) which was followed by a red candlestick in the following period, providing further bearish confirmation. Such a pattern signals a short-term reversal.

NZD/USD 4 Hour Chart

Forming as it did at the top of the range, the Gravestone Doji suggests a move back down to the lows of the range around 0.5852 on the horizon. A close below 0.6130 would provide further confirmation of more downside.

The MACD (Moving Average Convergence Divergence) line has almost crossed below the red signal line. If it does – which seems likely – it will provide further bearish confirmation.