NZDUSD sits at lower range boundary, USD relatively cheap, rally to continue?

NZDUSD was one of the pairs that experienced quite a sharp rally up and then came crashing down. Nevertheless, it seems to be ranging in the longer time frame due to the lack of fractal highs or lows. 

NZDUSD 4 Hourly
NZDUSD 4 Hourly

The current zone does not appear to be holding considering how sharply price cut in compared to the last zone entry. At the moment, it is best not to enter long despite the doji on the hourly close.

NZDUSD Hourly Time Frame
NZDUSD Hourly Time Frame

Quite a bit of activity in the last few hours of trading. There does not appear to be buyers going long, but rather sellers covering and then re-entering. Notice how each strong bullish candle is quickly followed by a bearish candle. In considering going long, it would be best to wait until a higher fractal low is shown on the 15 minute time frame. This fractal low should close above 0.771.

However, the weekly time frame does not look too promising. It appears to be in a downward wedge formation and only looks to break lower. If the price rises again, it would be a good opportunity to optimize the short entry for a long run trade. Keep in mind that the NZDUSD short swap is negative.

I came across an interesting chart over on eFXNews. This is the Dollar Index since the 1970s and it suggests that the USD is still relatively cheap as compared to historical highs.

USD Index
USD Index

Only question remains is whether or not the USD is capable of reaching near historical highs. The peak between 93-05 was relatively lower than the post 1981 high. However, the USD rally is expected to slow down as the price plays out on several critical zones.

EURUSD Monthly
EURUSD Monthly

EURUSD enters a monthly resistance turned support zone. This zone held up twice already, but price does not seem to be slowing down in the December month end. Candlestick stick size is still much smaller compared to the ones before it.

USDJPY is another pair that shows no sign of slowing done as it enters a critical supply zone as well as sitting at the 61.8 Fibonacci retracement level.

USDJPY Monthly
USDJPY Monthly

It would not be surprising to see a moderate sell off. A portion of the buyers can be expected to scale out their position especially with this extreme deviation.

Finally, USDCAD is interesting to note. It will be before some time before this pair reaches 2008 highs.

USDCAD Nears 2008 Highs
USDCAD Nears 2008 Highs

It is not too late to go long on USD bulls. There is still an 800+ pips move before this pair reaches the 2008 highs. A lower time frame optimized entry strategy will be published in a later follow up post.

In the meantime, it is a good idea to start looking to scale into USD longs. As several pairs enter a critical zone, there would be an opportunity to get a relatively better price on the temporary sell off on buy order closings.

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