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The NZDUSD is up for the 3rd consecutive day today after bottoming on Thursday last week. The low price reached 0.6216. That took the pair to the lowest level since early June 2020 and below the 61.8% of the move up from the 2020 low. The retracement comes in at 0.62298. The dips below the 61.8% could not be sustained, and the price started it’s 3 day run to the upside.
Today on the daily chart below, the price moved back above a broken trend line at 0.6349. The current price is at 0.6356 just above that level.
The dip buyer are making a play.
- The 61.8% break failed
- The trend line break failed.
- The price is up 3 days in a row.
It’s a potential start.
What would give the buyers some concerns/worry now?
With the move higher after a trend move lower, it can still be dangerous for dip buyers. As a result, it’s best to defined risk and limited risk. If the trade is not “risked out”, the counter trend probing can continue.
Looking at the hourly chart below in the NZDUSD, the move higher today extended back above its 200 hour moving average currently at 0.6319.
Looking back in time on May 4 and May 5, the price also traded above its 200 hour moving average. Moving back further on April 20 and April 21 (not shown in the chart below), the price traded above its 200 hour moving average.
However on each of those instances, the price break failed within 24 hours. Traders who bought above the 200 hour moving average sold when the 200 hour moving average was rebroken. It’s a simple as that.
Currently, the price for the NZDUSD is well below those other break levels (from May and April) which gives buying the dip an easier shot of success.
Nevertheless, it is important to be disciplined. As a result, staying above the 200 hour moving average would be the best case scenario for the “buy the dip” idea. Risk can be defined against the 200 hour moving average at 0.6319.
If you want to take more risk, staying above the lower 100 hour moving average at 0.6779 would be another risk defining level.
If the price were to move below the 200 hour moving average, and the 100 hour moving average the sellers would be more in control. I would expect further downside momentum with a run toward the low price from last week at 0.6217 on breaks of those levels.
However if the price can stay above those levels, there is room to roam in the upward direction.
Close target above come against the 50% retracement of the last leg down (from the last time the price traded above its 200 hour moving average) at 0.63923. That would be the minimum – and a required target to get to and through – if the buyers are to take more control.
Above that and traders would start to look toward other swing levels and retracement levels (see hourly chart below). The door would open for further upside momentum. Him
As a guide, the 38.2% of the move down from the April high at 0.7033 comes in at 0.65289. With the current price at 0.6355, there is a decent move to that normal targeted correction level, with minimal risk (below 200 or 100 hour MAs).
