This daily chart of NZD/JPY is what we at BabyPips.com like to call, “The Trifecta.” Here we’ve got three arguments for the pair to continue lower: 1. bearish divergence between the stochastic indicator and price action, 2. potential dynamic resistance at the 200 moving average and 3. potential resistance from the Fibonacci retracement pattern drawing in sellers. This “picture perfect” short setup can sometimes be too perfect, so it’s best to be patient and wait for the down move to appear because if it comes, it could be another strong leg lower.
This chart is for all you Greenback bulls and carry traders out there. With the Fed slightly raising rates in December, there could be underlying support for the U.S. dollar, and on this chart, the potential for a bottom and reversal higher lies at the previously strong support area between 118.00 – 118.75. The stochastic indicator is already showing potentially oversold conditions, but with the current shorter-term trend lower, playing it safe by waiting until the rising trendline and previous support area is tested is the conservative way to go.
For you range traders out there, EUR/GBP seems to be the best long-term range setup among the crosses, and with sentiment bearish on both the euro and British pound lately, we could see this go no where in 2016 if each of their driving fundamental themes holds in 2016.
The level to watch is the .7450 handle and the stochastic is already showing potentially overbought conditions, so this setup may be just ripe. If the resistance area does break to the upside, I’d definitely look for a fresh catalyst before hopping on long to avoid a potential fakeout given the current conditions. If it does hold, then targeting the bottom of the range makes for another fine reward-to-risk ratio with a tight stop above the range.
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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.