Yesterday’s low of 1.7734 on GBP/NZD came within pips of the July 11 low of 1.7714 and appears to be forming a double bottom price pattern. Notice how divergence is showing up in the RSI oscillator suggesting this recent push lower doesn’t have near the momentum as the move in early July.
Additionally, these recent lows also line up with the low in place back in April 2013 at 1.7709 (not shown). Therefore, if prices start to press higher, we can use that strength to position to the long side.
Chart by J. Wagner
Therefore, a break above the May-August trend line is our signal to buy. The trend line is currently sitting near 1.82. We can place a stop loss just below the recent swing low that forms when that trend line is taken out. It is not uncommon for this pair to move multiple hundred pips in a day. Therefore, we’ll want to give it a minimum of 200 pips of stop loss while targeting much higher levels to 1.90 and possibly 2.00.
Suggested Reading: Determining Profit Targets for Double Tops and Double Bottom Patterns
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---Written by Jeremy Wagner, Head Trading Instructor, DailyFX EDU
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