Market Analysis: Price Retraces to a Fair Value Gap
In late December 2023, NZDUSD commenced a notable bearish trend, leaving behind a significant high. This downtrend was characterized by the formation of lower lows, which indicates sustained selling pressure. As the pair approached the 0.58620 level, however, the bearish momentum began to wane, culminating in the formation of a double-bottom pattern. The pattern is interpreted as a bullish signal, suggesting a potential reversal of the downtrend.
NZDUSD Significant Zones
Resistance Levels: 0.60750, 0.62300
Support Levels: 0.58620, 0.57590
Indeed, the anticipated reversal materialized, propelling the NZDUSD through the resistance level that had previously reinforced the bearish trend. This breakout altered the market sentiment to favor the bulls. The newfound bullish momentum was strong enough to push the price above the 0.60750 supply level, resulting in the creation of a Fair Value Gap. Such a gap typically represents a swift price movement through a range where little trading occurred, signaling a sharp shift in market sentiment.
However, despite these bullish developments, caution was signaled by the daily Relative Strength Index (RSI), which indicated that the price had reached the overbought zone. This condition often precedes a weakening of the prevailing trend and suggests the possibility of an imminent bearish retracement. It is anticipated that this retracement may serve to fill the Fair Value Gap at the 0.60750 level.
Market Expectation
The daily Moving Average supports the bullish outlook, with the price trading above this key indicator. This reinforces the possibility of a resumption of the bullish trend following any potential retracement. The bullish momentum is expected to breach the 0.62300 level.
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