A little bearishness sneaks in
It is hard to pick a top in a trend move. The NZDUSD has moved about 390 pips over the last 19 trading days. 14 days have been up days, only 5 days had lower closes. 390 pips is a 5.7% increase in the NZD.
Traders have to give the trend the benefit of the doubt as trends go farther than you think.
Nevertheless, all good things come to an end (or at least have a correction of sorts)....
The last 4 days in the NZDUSD has closed higher, after correcting to the 100 day MA (blue line in the chart above) last Thursday and bouncing. The high today took out the high from yesterday, but only by less than 2 pips. HMMMM. There is some pause perhaps. Is the upside momentum slowing. Maybe....(that is the best you can say in a trending market...)
However, looking at the hourly chart below,
- The price ceiling has developed just over the 0.7200 level. There are three separate tops there (between 0.72035 and 0.72061). That is close risk for shorts looking for a top. It is always good to have a number of reasons to lean against. The hourly chart shows 3 highs. .
- We have moved below a topside trend line that was breached over the last few trading days. Yesterday it failed and came down toward a lower trend line support line. That line held ahead of the line at red circle 3. We are currently just moving below the topside trend line now at 0.7192. The price is not racing though. We are heading into the NY session close.
- The price has NOT moved below the lower trend line. If broken, it would be good to see some further down side momentum on a break to help confirm that buyers are turning to sellers.
I started this post with the phrase "It is hard to pick a top". However, if there are clues that allow you to map out a counter trend trader without much risk, you can take a chance.
Look for sellers to lean against the 0.7206 level. If it goes above, it is not time to mess around. However if it does stay below and crack some of the close support lines, it could be the start of a corrective move lower.
Fundamentally, China trade balance comes out in the new day. If you want to wait to see the number, and market reaction, the lines remain the same. Who knows, maybe there will be a failure on a failed break above the ceiling.