Despite the bad retail news yesterday from the US, we expected maybe a rally but things took a new twist and price couldn’t rise above the double tops which were clearly formed on the 1 hour charts. This means that the price closed with a long legged doji formation with a strong reversal bar forming in today’s Asian session following the news that last month’s RBNZ rate cut was botched and leaked by journalist. As we speak price action is clearly bearish and forming the right leg of the M-Formation.
With these technicals and fundamentals which occurred overnight, lets look at the charts:
Daily Chart Analysis
Price action showed a clear rejection of anything near the 0.70 level, a critical level in the daily chart which if broken, only with the right fundamental support and technical combination, might see price hit the 0.72 level which is a support breached in March 2015 and a 161.8 Fibonacci extension in this ranging channel we are currently in. At the moment, that double bar reversal formation and especially the doji formed yesterday with the momentum at the overbought region with candle sticks moving away from the upper BB only confirms that we should look to close our longs and initiate shorts in the lower time frames.
With yesterday disappointing core retail sales and PPI which turned out to be from 0.2% from the forecasted 0.4% and -0.1% from the projected 0.3% we shall be bracing ourselves and check out what will turn out today from core CPI which is forecasted to be at 0.2% from last month’s 0.3% and CPI projected at 0.2% from last month’s -0.2%. All this news will be released at 12:30GMT+3.
4 Hour Chart Analysis
From the chart, we can clearly see the double tops as shown by the green triangle above and price retracted from the overbought regions and is about to breach the 4 week support trend line. In my opinion, the trend line will be broken and price will trend even lower today and maybe reach the 0.66 levels which is the 161.8 Fibonacci extension level. This is so because there is a good indicator combination showing a clear reducing momentum and reducing volumes.
We shall have to wait for the fundamentals to see if inflation data is what the Fed Chairlady forecasted it to be following her speech in the International House in NewYork at the beginning of the week. We shall also see the unemployment claim numbers if it is reducing or increasing, it is projected to be at 270K from last week’s 267K.
15 Min Chart Analysis
The Asian session was clearly bearish with news filtering in of the RBNZ rate cut leak and price bounced off from the 61.8 Fibonacci level to the 161.8 Fibonacci level today. We look for a slight retracement to the 100.0 or to the 161.8 level as our short term resistance line-only for today before price move to the 261.8 Fibonacci level. The 4 hour support trend line is another resistance line to be considered for today and it will be wise to short at those mentioned levels.
Verdict: Short at all highs.