NZD/USD has been in a steady decline since failing at the key 78.6% retracement of the 2011 range in the middle of February. Our broader cycle perspective suggests the Kiwi should remain under pressure for some time to come. However, markets do not trade in a straight line and it is likely the pair will undergo some strong counter-trend moves within the context of a broader down cycle. On Thursday the pair tested and held a support zone that could prompt one of these types of reactions.
It was the .8550/60 area which is a convergence of the 78.6% retracement of the November to February advance, the 161.8% extension of the February advance and the 4th square root progression from the year-to-date high. This final support level is particularly interesting as its importance is rooted in Gann theory. Important moves often materialize between 4th and 6th square root progressions. Thursday’s low came at this level virtually to the tick and we now wonder if a counter-trend move has started. Follow through strength over a Fibonacci confluence at .8235 will do wonders to further confirm this suspicion.
NZD/USD Daily Chart: March 14, 2013
Charts Created using Marketscope – Prepared by Kristian Kerr
Event Risk Over Coming Sessions:
Source: DailyFX Calendar
LEVELS TO WATCH
Resistance: .8235 (61.8% retracement of Dec – Feb advance), .8555 (3rd square root progression from 2012 high)
Support: .8195 (88.6% retracement of Dec – Feb advance), .8160 (4th square root progression from 2012 high)
STRATEGY – BUY NZD/USD
Entry: .8181
Stop: .8135 (-46 pips)
Target 1: .8235
Target 2: .8285
Timeframe: 2-5 days
--- Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com
To contact Kristian, e-mail instructor@dailyfx.com. Follow me on Twitter at@KKerrFX.
Are you looking for other ways to pinpoint support and resistance levels? Take our free tutorial on using Fibonacci retracements.
To receive other reports from this author via e-mail, sign up to Kristian’s e-mail distribution list via this link.
.
