Almost one week ago I commented on how the NZDUSD had broken below the 0.7240 handle. The plan at the time was to wait for a retest of this level as new resistance.
Just three hours after yesterday’s close, the pair reached a high of 0.7241 before losing 35 pips over the next 12 hours. And while this is indeed a retest of 0.7240 as new resistance, the real debate is whether it’s a valid sell signal.
In my opinion, it isn’t. At least not yet.
If yesterday’s session hadn’t favored the bulls the way it did, I might be willing to take a “blind” entry (one without confirming price action) from this area. But after seeing yesterday’s 76 pip rally from session lows, I’m much more cautious about the idea of entering short here.
It is true that the New Zealand dollar is one of the weaker currencies against the greenback today. The one exception is the Aussie (due to the trend line from the May 2015 high). But it too has enjoyed a 70+ pip gain over the last 24 hours.
So, for now, I’m on the sidelines just waiting to see what transpires over the next 24 to 48 hours. It’s likely going to take a bearish pin bar from the 0.7240 area to get me off the bench.
Only a daily close above 0.7240 would negate the short-term bearish bias. Key support comes in at Tuesday’s low of 0.7133.
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