If you are confused about the price action, you are not alone. However, technicals often tell the story of the price action, and if you can think of the price action as the dilemma buyers and sellers are facing, that story becomes more clear.
IN the NZDUSD, we know the 61.8% was support. I talked to that in the post on the pair yesterday.
In the same post, I commented that IF the support does hold at the 61.8 retracement (and it did) this should happen. Specifically, I posted: :
So what happened?
The 61.8% held support and the price moved higher, and then the 200-day MA stalled the rally.
So what can you conclude?
A battle is on.
Now today, the price of the NZDUSD did move below the 61.8% on the volatility from the US data today, but quickly rejected the break and has settled between the two levels. That can happen especially after data releases. It stinks when it does, but the rejection tells you the market is more balance too.
Anyway, when you have a battle….a fight… someone will win eventually, but both (in this case buyers and sellers) are flailing and hoping to win.
What would be a win for the buyers?
- Get and stay above the 200 day MA and work higher from there (with the 100 day MA as a key target on the topside).
What would be a win for the sellers?
- Get and stay below the 61.8% and work lower from there.
The point is look at the price action when it is choppy and make a story about the battle. If you do that and put it in terms of winners and loser (in any currency pair or chart on anything), you know what needs to be done to push outside the battle range and declare the champion.
IN the meantime, be happy with battle story but understand choppy price action may continue (until it doesn’t). .
This article was written by Greg Michalowski at www.forexlive.com. Source