We recently looked over a potential sell signal on the NZDUSD at the start of the week. The trade idea didn’t work out as the NZD raised their interest rates. News like this is an unstoppable force in the market, and it’s these times where the fundamentals just take over momentarily. Now we’re switching back over to a technical trade opportunity.
NZDUSD has exploded upwards off the back of the interest rate decision and has smashed into a resistance level. The market is now super super extended away from the mean value. This large gap creates a ‘gravity well’ between the mean and price. The market will want to balance itself out here and retrace back to the mean value. Buying at these extended prices would be ‘buying at the top’. After charts see this large gap, the market will generally ‘snap back’ very quickly to the mean.
There is no price action signal here. We’re just working off the mean gap + the resistance level. I can’t see prices moving higher before correcting lower first. Stops could go above the resistance level just in case. One of the advantages learning how to trade forex using price action strategies is that you can learn to read raw charts and understand the markets much more clearly.