GBP/NZD has been steadily moving higher while bouncing around an ascending channel that has been respected since mid-October. As y’all know, one of the most conservative ways to play an ascending channel is to look for buying opportunities near the bottom of the channel, which is where price is currently at. However, price is milling about below the price area of significant market interest around the 2.3300 major psychological level. In addition, price has been closing below the 100 and 200 SMAs and both SMAs are moving closer together for a potential cross-over into downtrend mode. Not only that, stochastic is also pointing down and moving away from overbought territory, so there’s a good chance that a downside channel breakout will occur.
As the old saying goes, “if life gives ya lemonade, then go make lemon-flavored ice cream” or something like that. Anyhow, the rather tight 30-pip trading range or rectangle that we identified on EUR/GBP’s 1-hour forex chart last Friday is still intact. And it just so happens that price is presently testing the rectangle’s resistance area around the 0.7020 handle. And resistance seems to be holding, so a shorting opportunity may present itself soon. Looking at our technical indicators, we can see that the moving averages are still, although price penetrated the 100 SMA, which is a bit worrying. Stochastic is encouraging, however, since it’s presently indicating overbought conditions, so sellers may start coming in soon.
That there descending channel was validated only a couple of hours ago when price bounced off the forex chart pattern’s support area. However, there’s a chance that the channel will be invalidated soon since stochastic is already moving down and away from the overbought area. In addition, the pair just recently used the price area of interest around the 2.1150 minor psychological level as a launching pad and the moving averages have crossed-over into downtrend mode to boot. Still, let me just remind y’all that the most conservative way to play a descending channel is to look for resistance and selling opportunities near the top of the channel. In any case, just make sure to practice proper risk management should you find a trade based on this or any of the other charts, okay?
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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