By: John Ursus
Timeframe: W1
Recommendation: Long Position
Entry Zone: 0.7750 – 0.7850
Take Profit Zone: 0.8400 – 0.8500
Stop Loss Zone: 0.7400 – 0.7500
The NZDUSD has corrected over the past four trading months amid a combination of New Zealand Dollar weakness, assisted by weaker Chinese data, and a sharp rally in the US Dollar amid an expected exit by the US Federal Reserve of its quantitative easing program. The correction took this currency pair from an intra-day high of 0.8835 to an intra-day low of 0.7659 from where the NZDUSD was able to stop the correction and move higher. This currency pair may experience a sharp short-covering rally amid extreme oversold conditions.
The four month correction took the NZDUSD below its Fibonacci Retracement Fan and there is no resistance level standing in the way of a move higher. This resistance free zone could accumulate enough upward momentum in order to break back into the ascending Fibonacci Retracement Fan for more upside potential. Forex traders are advised to spread their entries over a 100 pips range between 0.7750 and 0.7850. The downward potential appears to be rather limited while the upside potential remains very attractive.
