The low price reached 0.6216. That took the pair to the lowest level since early June 2020 and below the 61.8% of the move up from the 2020 low. The retracement comes in at 0.62298. The dips below the 61.8% could not be sustained, and the price started its three-day run to the upside.
Today on the daily chart below, the price moved back above a broken trend line at 0.6349. The current price is at 0.6356, just above that level.
The dip buyer is making a play. The 61.8% break failed. The trend line break failed.
The price is up three days in a row.
It’s a Potential Start
What would give the buyers some concerns/worries now?
With the move higher after a trend moving lower, it can still be dangerous for dip buyers. As a result, it’s best to define risk and limited risk. If the trade is not “risked out,” the counter-trend probing can continue.
Looking at the hourly chart below in the NZDUSD, the move higher today extended back above its 200-hour moving average, currently at 0.6319.
Looking back in time on May 4 and May 5, the price also traded above its 200-hour moving average. Moving back further on April 20 and April 21 (not shown in the chart below), the price sold above its 200-hour moving average.
However, in each of those instances, the price break failed within 24 hours. Traders who bought above the 200-hour moving average sold when the 200-hour moving average was rebroken. It’s as simple as that.
Currently, the price for the NZDUSD is well below those other break levels (from May and April), which gives buying the dip an easier shot of success.
Nevertheless, it is essential to be disciplined. As a result, staying above the 200-hour moving average would be the best-case scenario for the “buy the dip” idea. Risk can be defined against the 200-hour moving average at 0.6319.
If you want to take more risk, staying above the lower 100-hour moving average at 0.6779 would be another risk-defining level.