Despite its choppiness since the start of this year, the NZDUSD pair has traced out what may be considered to be a respectable impulse wave.
By this count, wave 2 and wave 4 held at their respective 61.8% retracements of wave 1 and 3, and wave 5 is an ending diagonal whose subwave ii retraced a bit more sharply than normal. Additional reasons to believe that the impulse wave has ended are the tweezer top formation just shy of the psychologically significant round number 0.7000 reinforced by a spike in volume.
If this count is correct, we are currently in a corrective wave down. Trading this wave is doubly safe because the larger macro trend is down, despite the upward momentum since the start of the year. Furthermore, even if we are in the start of a new uptrend, we might expect a sharp correction in the ensuing second wave.
Bearing in mind that ending diagonals often retrace swiftly to their point of origin, the safest way to trade the NZDUSD in the near future would be to buy the breakdown of the lower ascending trendline.
A more conservative approach would be to wait for the likely pullback in wave B since A is the third touch of the trendline, and short anywhere in the entry zone between 0.6885 and 0.6965.
The hard stop should be just above 0.7000. Take profit is at the bottom of wave 5 around 0.6500.
A key price level to take note of is 0.6755, which is the top of wave 3 as well as the possible base of corrective wave A. Consider scaling out and locking in profits in this region.
A possible scenario for this wave-count being incorrect is if wave 4 completes at the point currently marked subwave ii. If so, we are in the final subwave of an ending diagonal, in which case a violent reversal is to be expected at 0.7000. Either way, a sufficiently well placed stop just above 0.7000 should not be hit.
Best of luck!
By this count, wave 2 and wave 4 held at their respective 61.8% retracements of wave 1 and 3, and wave 5 is an ending diagonal whose subwave ii retraced a bit more sharply than normal. Additional reasons to believe that the impulse wave has ended are the tweezer top formation just shy of the psychologically significant round number 0.7000 reinforced by a spike in volume.
If this count is correct, we are currently in a corrective wave down. Trading this wave is doubly safe because the larger macro trend is down, despite the upward momentum since the start of the year. Furthermore, even if we are in the start of a new uptrend, we might expect a sharp correction in the ensuing second wave.
Bearing in mind that ending diagonals often retrace swiftly to their point of origin, the safest way to trade the NZDUSD in the near future would be to buy the breakdown of the lower ascending trendline.
A more conservative approach would be to wait for the likely pullback in wave B since A is the third touch of the trendline, and short anywhere in the entry zone between 0.6885 and 0.6965.
The hard stop should be just above 0.7000. Take profit is at the bottom of wave 5 around 0.6500.
A key price level to take note of is 0.6755, which is the top of wave 3 as well as the possible base of corrective wave A. Consider scaling out and locking in profits in this region.
A possible scenario for this wave-count being incorrect is if wave 4 completes at the point currently marked subwave ii. If so, we are in the final subwave of an ending diagonal, in which case a violent reversal is to be expected at 0.7000. Either way, a sufficiently well placed stop just above 0.7000 should not be hit.
Best of luck!