Zooming out to the weekly chart, we can see a huge technical argument forming for forex traders to jump in long on NZD/CAD. After a strong burst higher starting in the mid-summer, the Kiwi has fallen back to earth on the broad selling of commodities and commodity currencies over the past month, as well as some secret intervention by the Reserve Bank of New Zealand in August.
The pair is now approaching the rising trendline that has held strongly since 2013, as well as the 61% Fibonacci retracement level. With the stochastic indicator potentially oversold conditions, this retest may tempt Kiwi bulls to jump back here.
The top of the rising channel I pointed out earlier this week on the one hour seems to be holding now like a champ, and when I looked at the higher time frames I could see why. Not only is EUR/AUD testing a rising channel, but also a major area of interest around the 38% Fibonacci retracement level AND major psychological level of 1.4500. Stochastics are also indicating overbought conditions, which makes this a tempting short play on what has already been a pretty strong downtrend.
Last week, EUR/USD has finally broken the major support area around 1.2800 that held strongly back in the summer of 2013. The breakout seems to be legit, which means that it’s likely we’ll see more sellers pile into this strong momentum lower, and that we may not see major support again until the next support level around 1.2050.
There is a giant “X” factor with the ECB monetary policy decision coming soon and the uncertainty of what Draghi and company may do to stem economic weakness, deflation, and the beatdown the euro has been taking.
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.