Price has been consolidating into what looks like an ascending triangle with a false breakout (or a bullish pennant on the higher time frames). As an ascending triangle, our directional bias is to the upside. And for confirmation, the 100 SMA and 200 SMA are still in uptrend mode. That false breakout worries me, though. To me, that indicates that seller interest is very strong, but not quite strong enough to send the pair down. Still, this is a triangle we’re talking about, so a downside breakout may occur as well, and prudent forex traders should prepare for such a possibility.
Price action on the GBP/NZD pair has been quite choppy lately, but overall direction becomes clearer when price action is framed within an ascending channel. The basic way to play this channel is to look for support near the bottom of the channel, but price is still a ways away from the bottom. Nonetheless, we may see price moving back up again because a bullish hidden divergence has formed between price action and the stochastic oscillator, with price making higher highs and stochastic making lower lows. Also, the 100 SMA and 200 SMA are indicating that the uptrend is still quite healthy.
NZD/USD has been moving in a nice and neat downtrend for several weeks now. Last week, it broke through the 0.7100 major psychological area, which has been serving as support. Now, price has gone back up to retest the said 0.7100 area. But will resistance form here?
I’d say that there’s a better-than-average chance that resistance will form at that price level. First, the downtrend is still very strong, as indicated by the moving averages. Second, stochastic is in overbought territory, indicating that buyers may potentially be exhausted. Third, price broke through with convincing momentum, implying that sellers were really in control. And fourth, the 0.7100 price level has seen significant market interest in the past (even on the higher time frames), so forex traders who are bearish on the pair may start to nibble soon.
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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.