NZD/USD Price Analysis: Bulls pulled in by the allure of the daily M-formation

• NZD/USD bears have been in the driver's seat, forming a daily M-formation.
• There are two scenarios on the cards currently, both of which encompass the M-formation's allure. 

Further to the prior analysis, where the price has been trapped between support and resistance, there are now bullish prospects for an M-formation on the daily chart.

However, the bears are in control, so there is the likelihood of an overextended M-formation as well should the market continue to deteriorate to the support of the channel. 

The prior analysis was as follows:

NZD/USD Price Analysis: Trapped between daily support and resistance

NZD/USD bears in control, targetting daily channel support

Prior analysis, 4-hour chart

In Asia, the price dropped to a meanwhile support area where some consolidation and a retest of the 38.2% Fibonacci was expected and subsequently played out. 

In doing so, a downside extension can now be expected to challenge the channel support. 

Live market, 4-hour

As illustrated, the market tested the 38.2% Fibonacci and then melted back to the downside for a lower low on the way towards channel support. 

In doing so, a bullish daily M-formation is being formed as follows:

Daily chart, M-formation

The theory is that an M-formation's neckline will be tested.

In the current scenario, the neckline already meets a 38.2% Fibonacci retracement level.

However, should the market continue to melt to the channel support, an overextended M-formation will be formed. In such a case, the 38.2% Fibo of the entire bearish impulse a least, or the wick of the formation's neckline will be targetted.