~ Week Of July 25th 2016 ~
Is The Key Price Level Strong Enough?
Published by Jay - July 24th 2016
The GBPNZD pair has been in a steady downtrend since September 2015, making small rallies higher along the way before continuing to fall. Over the last week or so, another rally higher has occurred after bouncing off a previously respected lower level, with this pair now stalling at an upper key price level.
Looking back over the last 4 years at the upper key level on the daily chart from 2012 to today, it's evident that this level has held on a number of occasions thereby proving to be a strong area that market players have reacted around.
Zooming in on the chart below, we can see that the market made a nice progressive rally higher creating a V - shape formation. This means that there is minimal congestion to the left of the current price and provides room for a possible move down. That being said, there are a few points that are evident from the recent price action that we need to be mindful of before committing to a short trade on this pair.
On two occasions the market attempted, but failed to move lower when in close proximity to this key area, as depicted by the long upper wicks of the candles on the 15th and 19th of July. Additionally, the bearish candle that has respected the upper level is not large and convincing enough to base a trade around, and was unable to close below those candle wicks. So the question is whether or not the key price level can now hold?
In the new trading week ahead, we can watch to see if the market prints off a stronger and more convincing indication to get short with the current downtrend. We can also keep our eyes open for a breakout higher, as there is a possibility of this happening as just discussed. If the market does move up breaking the key level, we will look for a retrace to get a good entry to buy into this pair. At this point in time we will patiently wait for confirmation before entering the market.