If you’ve got a bearish bias on the pair, be extremely careful before jumping in. Even though the Stochastic shows that conditions are overbought, momentum is heavily tilted to the upside, as yesterday’s candle was a very bullish one. It has a long body but short upper and lower shadow. If 1.0400 breaks, the pair could skyrocket to 1.0600 before it finds resistance.
Of course, I’m not going to leave the sellers hanging, as I’ve got a setup for them too! As you can see from NZD/USD’s daily chart, price has managed to break through the bottom boundary of the long-term ascending channel. This suggests that the pair’s uptrend could be over, and that it could experience more losses in the future. If we see a significant break of .8200, we could see the pair fall to .8000.
How about those without a clear directional bias? Don’t you worry because I also have something for them. Yesterday, I showed that USD/JPY’s daily chart shows an uptrend. Upon closer inspection, however, the shorter time frame reveals that the pair is actually ranging. Price is trading within a 100-pip range, with support at 95.50 and resistance at 96.50. These levels could serve as good entry points to go either short (if price is at the top of the range) or long (if price is at the bottom of the range).
To get the complete picture and avoid getting blindsided by economic data, you also have to do your fundamental analysis.
Lucky for us, Pip Diddy fills us in on what we need to know about fundamentals with his Daily Forex Fundamentals.