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Sell the Rips & Buy the Dips?

Sell the Rips & Buy the Dips?

2014-06-27 12:30:00
Kristian Kerr, Sr. Currency Strategist
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Talking Points

  • Sentiment extreme in the Kiwi
  • Cyclical picture turning negative

Unfamiliar with Gann Square Root Relationships? Learn more about them HERE.

NZD/USD punched through the 8th square root relationship of the year’s low at .8770 today to record a new high for the year. We have been pretty bullish on the Bird recently (Read HERE), but with the short-term cyclical picture turning negative at the same time that the exchange rate is testing the upper bounds of its recent range and a key median line drawn off the year’s low we are thinking a counter-trend wave could be in the cards over the next few days. Sentiment is also at levels that cause concern for us as the Daily Sentiment Index (a survey of short-term futures traders) touched 89% bulls yesterday. Such lopsided one-way sentiment is common around turning points and a strong contrarian signal. Resistance between .8785 and .8805 should hold if our immediate topping view is correct. Any strength over this level after Monday would undermine this negative view and re-focus attention on a test of the all-time high. A move below .8725 should be enough to confirm that some sort of top is in place.

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NZD/USD Daily Chart: June 27, 2014

Sell the Rips & Buy the Dips?

Charts Created using Marketscope – Prepared by Kristian Kerr

Key Event Risk in the Sessions Ahead:

Sell the Rips & Buy the Dips?

LEVELS TO WATCH

Resistance: .8785 (Median line), .8840 (Fibonacci)

Support: .8680 (Gann), .8640 (last week’s low)

Strategy: Sell NZD/USD

Entry: Sell NZD/USD at .8780

Stop: 1-day close above .8810

Target: .8680

--- Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com

To contact Kristian, e-mail instructor@dailyfx.com. Follow me on Twitter at@KKerrFX.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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