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NZDUSD at Key Support and August Range Low- Exhaustion or Break?

NZDUSD at Key Support and August Range Low- Exhaustion or Break?

2014-08-05 20:35:00
Michael Boutros, Strategist
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Talking Points

  • NZDUSD August opening range takes shape above technical support
  • Possible key inflection range 8440/50
  • Limited event risk on tap this week

NZDUSD Daily Chart

NZDUSD at Key Support and August Range Low- Exhaustion or Break?

Chart Created Using FXCM Marketscope 2.0

Technical Outlook

  • NZDUSD testing critical support ranges 8440/50 & 83985-8416bullish invalidation
  • Break targets support objectives at 8350/60, 8259, 8213/24
  • Outside day reversal at the lows may suggest near-term exhaustion- reversal risk
  • Key resistance 8532/35- bearish invalidation
  • Break targets 8567, 8600, 8650
  • Daily RSI holding June lows- possible exhaustion
  • Event Risk Ahead: New Zealand Employment data tonight and US Trade Balance tomorrow

NZDUSD 30min Chart

NZDUSD at Key Support and August Range Low- Exhaustion or Break?

Notes: Back on July 14th we warned of possible exhaustion on the long-side of NZDUSD as the pair approached the 2011 highs around 8840. The subsequent turnover went well beyond all our support objectives and the kiwi now finds itself approaching key support to open August trade. The 8440/50 region is defined by multiple Fibonacci relationships as well as the 200-day moving average and will converge on trendline support dating back to the August 2013 low for the next few days. With the daily momentum signature holding the June lows the risk for a reversal higher builds while above this threshold.

Bottom line: looking for signs of exhaustion with a preference to buy dips near-term while above 8440. A break below this level puts us neutral with a move surpassing 8400 keeping the medium-term focus weighted to the downside heading into August trade. Look for a move surpassing the weekly opening range high / key resistanceat 8532/36 to add conviction on long-side exposure with such a scenario suggesting a more significant low may have been put in this week.

The average true range has remained rather tight here so we’ll up the profit targets to 38.2% of the daily ATR- this puts us at about 21pips per scalp. Note that caution is warranted heading into tonight’s data with the event likely to fuel added volatility on kiwi crosses. Follow the progress of this trade setup and more throughout the trading week with DailyFX on Demand.

* It’s extremely important to give added consideration regarding the timing of intra-day scalps with the opening ranges on a session & hourly basis offering further clarity on intra-day biases.

Key Threshold Grid

Entry/Exit Targets

Timeframe

Level

Technical Relevance

Resistance Target 1

30min

8495

Sunday Low / Pivot

Bearish Invalidation

Daily / 30min

8530/36

Weekly ORH / 100% Ext / 38.2% Retrace

Break Target 1

Daily / 30min

8565/67

61.8% Retracement / Soft Resistance

Break Target 2

Daily / 30min

8600/03

61.8% Extension / Monthly Pivot

Break Target 3

Daily / 30min

8622/25

100DMA / 50% Extension

Break Target 4

30min

8647/50

38.2% Ext / 23.6% Retracement

Break Target 5

Daily / 30min

8718/32

7/21 High / R1 Monthly

Bullish Invalidation

Daily / 30min

8440/50

200DMA / 88.6% & 50% Retrace(s) / TL Support

Break Target 1

Daily / 30min

8395/16

June Low & Close Low / 1.618% Ext / 38.2% Retrace

Break Target 2

Daily / 30min

8351/60

61.8% Retracement / S1 Pivot / April 2013 Low

Break Target 3

Daily

8259

50% Retracement

Break Target 4

Daily

8213/24

2008 High / S2 Pivot

Average True Range

Daily (20)

55

Profit Targets 20-22pips

*ORH: Opening Range High

*ORL: Opening Range Low

Other Setups in Play:

---Written by Michael Boutros, Currency Strategist with DailyFX

For updates on this scalp and more setups follow him on Twitter @MBForex

To contact Michael email mboutros@dailyfx.com or Click Here to be added to his email distribution list

Join Michael for Live Scalping Webinars this week Tuesday – Thursday on DailyFX Plus (Exclusive of Live Clients) at 15:30 GMT (11:30ET)

Interested in learning about Fibonacci? Watch this Video

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