Retraces to the 38.2%
The price stepped higher and moved up to a high price 0.70873. That high got within seven pips of near converged 200 day and 100 day moving averages near 0.7095.
Of course the much stronger than expected ISM service index, and the more hawkish tilt in the Clarida comments helped the move the pairs price lower. Nevertheless, someone sold near the moving average levels on the back of strong resistance and low risk. Good for them.
Now, the subsequent move to the downside has pushed the price toward the 38.2% retracement of the move up from this week's run to the upside. That level comes in at 0.70355. The low price reached 0.70347.
Is that a good level to buy? Has the correction run its course?
The good news is traders can lean against that level and use it as a stop.
Risk is defined. Risk is limited.
If the sentiment for that pair returns back into the buyers camp, the dip will have represented the “dip to buy” and that is not a bad idea – especially if risk can be defined and limited.
A move below the 38.2% retracement would next look toward the 50% and the swing highs from Thursday, Friday, and yesterday's trade. That area comes in at 0.70195 area. It also represents a low risk dip buying level.
On the topside the swing high from July 7 at 0.70607 would be a target to get to and through. Above that and traders will be focused on the two daily moving averages near the 0.7095 area.
PS Below is what it looks like on the daily chart. The MAs stalled the rise, but there is also resistance against a swing area between 0.7095 and 0.71148 and the 30.2% retracement of the move down from the February high at 0.71033. So there is a month of overhead resistance in the area by the 100/200 day moving averages