NZDCHF’s false break outside the regression channel suggests that a Head & Shoulders pattern is on its way to completion.
In this bullish case, the pattern is expected to decline the range between the head and the neckline. The range on the pair is some 165 pips, from the low of 0.61350 to the head’s high of 0.6300.
If the relationship is respected, then the pair can be expected to revisit the 0.5980 zone.
There, prices will also intersect with the lower end of the regression channel. This could come after rejection on the median line. This is unless the pair breaks through the support with high momentum.
The chart below indicates that a pullback could also be in play. This could take place after a successful bounce at the 0.6063 support.
This level isn’t just a high activity level but also where the short-term neckline-to-shoulder range is expected to push prices down. In this case, the short-term range is 80-pips long, from 0.6146 to 0.6226.
A successful break of the said level will increase the chances of NZDCHF reaching the lower target. That is below the 60 psychological support.
Otherwise, we could move back above the upper channel, invalidating the H&S pattern. For that, prices will have to break above the neckline at 0.6146 first.