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NZD/USD Buy on Dip To .6850

Last updated 2/24/2010 2:17 PM EST (GMT -5) 3 Comments

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FX360 Technical Analyst Staff

Technical Analyst, GFT

The NZD/USD is showing solid near-term support near .6850 based on an emerging 4hr bullish butterfly pattern projected to complete near the following Fibonacci/pattern convergence:

There is a bit of room down to .6816 where the 161.8% ABCD extension is projected to complete, which also comes in right around previously established support near .6800 seen in the bottom preceding point X. Any gaps and/or wide-ranging candles (2-3x's average) prior to the projected entry may push prices down to this level (resulting in a double-bottom Gartley pattern), which may help cut down risk in turn increasing reward.

A move below 161.8% of XA (.9785) suggests a potentially strong bearish continuation so logical stop placement is just below at .6780 (if stopped, continuation down to daily fib support near .6677). The initial profit target of .6975 represents 61.8% correction of the projected CD leg with stops moved to break even at .6895. Depending on price action prior to achieving this inital target, there may be an extended target near 61.8% daily resistance  near.7200.

Potential strategy: Buy if prices dip to .6855 with stop-loss at .6780 targeting .6975 (stop to break even at .6895).

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Comments (3)

silver

February 24, 2010 at 10:49 PM ET

why are we buying at .6855?

rstojsic

February 25, 2010 at 08:30 AM ET

"The NZD/USD is showing solid near-term support near .6850 based on an emerging 1hr bullish butterfly pattern..."

rstojsic

February 25, 2010 at 08:33 AM ET

in other words, these converging levels of support (discussed in article) increase the odds of at least a temporary market reversal near pattern completion at point D (that's why this is referred to as a bullish pattern). hope this helps!

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