This one’s for the longer-term Fibonacci players out there as both EUR/GBP and NZD/CAD could be reaching the end of their trend retracements.
Sterling bulls have been loving EUR/GBP this year as the pair has basically been in a one-way move lower since the Summer, peaking at around 0.9300 back in August then making its way to a low just under 0.8300 in December. We’ve seen a pretty strong bounce since then to the 0.8500 – 0.8600, which as a very strong area of interest between October through November, and now seems to be drawing in sellers at the moment.
With the pair stalling at the 38% Fibonacci retracement area and the stochastic indicator showing potentially overbought conditions, this pair should be interesting to longer-term traders who want to play the strong trend lower. For you guys, watch out for resistance to build at current levels up to the 61% Fibonacci retracement level and/or the stochastic to come out of overbought conditions before building up a short position in EUR/GBP.
We’ve got a similar setup to EUR/GBP above in NZD/CAD, as the pair has been pulling back from a strong downtrend in 2019. The pair topped out way back in March just under the 0.9300 handle, and with very few speed bumps along the way, eventually bottomed out just above the 0.8200 handle before retracing.
Just like EUR/GBP above, NZD/CAD has made it’s way to the Fibonacci retracment area of that longer-term move lower, and the stochastic indicator has been signaling overbought conditions for quite some time now. The setup to look out for for longer-term players is for consolidation / resistance to form between 0.8650 – 0.8900 handle, a strong area of interest between May and August. Of course, the higher you sell, the better for potential return-on-risk, but if this area holds once again and the market breaks lower from there, selling at that point should yield a pretty good R:R if targeting beyond the 2019 lows.
In both EUR/GBP and NZD/CAD, these setups will not only likely draw in technical traders, but fundamental ones as well given that the interest rate differential favors the quote currency so the odds of success are pretty good in both cases. But don’t ignore any upside breakout of the marked levels above on surprise geopolitical or economic news. Practice good risk management decisions always no matter which bias you choose to trade in these setup!
Forex Chart Settings:
Slow Stochastic: 14,3,3