08 May GBP:NZD & EUR:NZD Analysis; 7th May 2013
Following overnight news that RBNZ have been selling NZD due to their belief its over-valued with a promise to continue intervention as necessary, I decided to take a closer look.
When trading this pair I find MACD very helpful. With regards to the long side, I would analyse as follows.
The Weekly candle is up against the 20 MA, quite a common retrace level in a Weekly trend. Also, my downside target of 1.71 hasn’t been achieved yet so I’m not convinced a long term low is in place, but a medium term one could well be.
Price within the red circle is very similar to the price action in the previous red circle. Note how an up day like today’s may be followed by a deep red candle in the next couple of days…. May or may not happen, but if it does I’d suggest its a good buy.
Every rally of any significance has occurred without fail after the formation of positive MACD divergence. We have a nice well defined divergence bang on the recent lows.
Some of the best rallies across fast moving pairs like this tend to coincide with both MACD moving averages travelling upwrds very closely together. As can be seen in the red box from a previous rally, we have exactly the same formation now, suggesting the move may have legs.
In conclusion, I’d say there is some upside ahead, but it will be choppy. You need to be buying when things look their worst, i.e at the end of a deep down day.
I’d possibly favour buying EUR:NZD because in the very short term there is less resistance, therefore allowing you to get stops to break-even a bit quicker, ultimately targeting the channel.
Furthermore, of all NZD pairs, this one found most strength after the overnight news.