Way back on February 1, we was lookin’ to go short when price was close 0.7520. That’s because we were playing a descending channel back then, which y’all can still see on that there chart. However, I also told y’all a strong move past 0.7550 could be a sign that bulls are taking control. Well, as it turns out, that was indeed the case, since the pair moved for over 160 pips from 0.7550. So if you were able to switch your trading bias, then congratulations for baggin some pips. You’ve got game, dawg!
Anyhow, if we take the most recent price action account, we can see that a fresh ascending channel has now formed. We ‘re still expecting the pair to move higher. However, the pair has reached the channel’s resistance area and price seems to edging lower already. As such, there’s a very good chance that a pullback would occur. And using our Fibonacci tool, all retracement levels look like valid pullback areas to watch. However, the most conservative pullback area appears to be the 61.8% retracement level. Why? Well, that’s because that retracement level sits right smack on 0.7630, a price area with significant market interest that served as resistance in the recent past. It’s therefore very likely that them bulls would be waiting there. just be ready to bail or switch bias if the pair smashed 0.7630 with great momentum, though, since that could mean that them bears are gunning for a downside channel breakout.
In our intraday charts update for February 2, NZD/USD was making its way higher to 0.7360. However, the bullish momentum has slowing, so I told the more gangsta traders out there to keep an eye on how the pair reacts to 0.7360 since them bears appear to be waiting there. And that if them bears really are waiting there, then they may attempt a downside channel breakout. That’s why I told y’all that ya may wanna prepare for a downside breakout scenario as well. Well, looks like that was sound advice since the pair moved lower for almost 200 pips from 0.7360 and about 150 pips from the breakout point. So, congratulations to those of ya who were gangsta enough to short at 0.7360, as well as the more conservative forex traders who were patient enough to wait for a downside breakout.
The moving averages are now in downtrend mode, so our main directional bias is to the downside. Also. the pair is currently consolidating into what appears to be a bearish flag, which reinforces our downside directional bias. Just make sure to keep an eye on the next area of interest at 0.7120. But if the pair smashes past that, then bears will likely be shooting for 0.6980 next. You may wanna consider bailing or possibly switching bias if the pair suddenly surges past 0.7260, though, especially since stochastic is already signaling oversold conditions and all that. And as always, just make sure to practice proper risk management, a’ight?
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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.