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  • Writer's picturen ev

The NZDCHF continues to trend higher, with breakout traders and trend followers.

It is well known that price advertises in such a way that retail traders are tempted to speculate into a position only to eventually realize they were being used as liquidity providers. Getting in on a trend early and trying to hold on over a long period of time and many trades seems to work out better than short-term trading, but you must be willing to cut your losses early and hold on to your winners.

Forex Analysis

Currently, the forex heatmap is showing a move into the Kiwi and a departure from the Swiss franc. From Switzerland this morning the State Secretariat for Economic Affairs (SECO) reported that the economic recovery is set to continue as expected, though growth is initially less dynamic than forecast previously. The expert group has lowered its growth forecast for 2021 to 3.2 % (adjusted for sporting events). This is nonetheless significantly above average for the Swiss economy. Whereas the Statistics New Zealand GDP report showed an increase of 2.8% in June 2021 which is up 4.3% since pre-covid.

The ActivTrades sentiment indicator is at an extreme level of bearishness, which is probably due to the media reports of continued lockdown divergence between the two countries. As 80% of retail traders usually get on the wrong side of a move, it is safe to say I am looking for reasons to get long.

The first major reason to get long is that the weekly chart for NZDCHF shows price action is now above the 200-period exponential moving average. The swing high that formed in February 2021 is the year high and since that spike higher to 0.67647 the correction towards 0.6250 was controlled and within a descending channel. Price paused at the previous swing high resistance now support from May 2020 and has since bottomed out there, made 3 weeks of consecutive higher highs and higher lows. Using Fibonacci retracement levels, the 61.8% retracement was the clear target where buyers stepped in. Assuming that they are in it for the long term as this is a weekly chart, the Fibonacci extension to the upside shows a measured move as a good TP1 around the 0.7000 level with a further extension all the way up to 0.7600.

On a lower timeframe, the H4 chart is about to show an aggressive breakout from the current range and if that were to happen, I would be looking for a retest of that level before a continuation higher. Alternatively, using the Stochastic indicator (10,3,3) and the 50-period ema, the oversold oscillator when confluent with price returning to the dynamic support of the ema, seems, for now, to be a good level to look for buying opportunities when considering buying the dip.

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