NZD/USD Price Analysis: Fading opportunity for 1:3 risk to reward

Developing story

NZD/USD is showing signs of exhaustion on the upside in supply territory on the longer-term time frames.
Bears are looking for a short entry on a decelerating correction, fading the retracement.

As per yesterday's analysis, there are prospects for the downside on a short-medium term basis offering both day trading fading opportunities and medium-term swing trading opportunities.

Yesterday's medium-term analysis can be found here: NZD/USD Price Analysis: Longer-term bullish, short-term bearish.

Meanwhile, for the sessions ahead on the 2nd September, starting ahead of the Tokyo open, the price of NZD/USD has retraced a bearish impulse in moves that broke structure initially to the downside and then corrected back above it.

The structure is located between 0.6753 and 0.6760.

The retracement from the lows of the impulse has reached a 61.8% Fibonacci retracement at 0.6763.

Should the hourly conditions now switch from bullish to bearish, and should the price break the structure back to the downside, there will be an opportunity for a downside continuation trade, fading the latest correction.

The following charts offer an illustration of how this trade set-up could come to fruition for a 1:3 risk to reward opportunity:

The price action will be monitored from a lower time frame at the point from which the decelerating correction starts to test the structure.

At the point for which the price moves in on the structure, an entry signal will trigger a short set-up providing the conditions are bearish.

Update

Unfortunately, the current price action is invalidating the trade set-up.

A sharp move to the 78.6% Fibonacci retracement is a pip too far:

Adrian Orr, the Reserve Bank of New Zealand is speaking later today, 0130 GMT. The event could spark some volatility in the pair and it will be monitored for further opportunities.

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