Short NZDUSD at Market
Heading into the year NZDUSD was on the radar as big-picture short. The confirmation noted was a clean weekly break below the trend-line rising up from the August 2015 low. This is an excerpt from our Top Trading Opportunities in 2017:
“Trading this theme: This is highly dependent on the time-frame which one operates on, but the idea on this end is to wait for a confirmed break [Aug ’15 trend-line] and then look to retracements on the daily chart.”
To start the year there was a speed-bump in this idea (a big bounce), but now kiwi is trading below the big-picture trend-line, and with that the stage is set for lower prices, and perhaps significantly lower.
The trend-line off the August 2015 low was clearly broken last month. Since then, a retest and rejection has taken shape. The lackluster price action after a break of a significant trend-line points to lower prices. Adding in an additional point of resistance on minor strength is the trend-line descending down from the Feb 7 high. Should kiwi pop higher from here the two lines could intersect to form a confluence of resistance. Placing a stop beyond this potential intersection makes sense in that a break above both lines could signify a trend change, even if only temporary.
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Looking lower towards the next levels of support, or targets; we first have a lower-side parallel connecting points as far back as June, which currently lies around the 6775 mark. Given the angle is in-line with the trend it is only viewed as a minor line of support, and expected to only bring a pause at the most before seeing additional losses. About 100 points lower from the lower parallel are a couple of inflection points from the first-half of 2016; the first at 6675, and more significantly are a cluster of lows arriving in the vicinity of 6575/50. This cluster, depending on the timing, aligns well with a trend-line rising up from 2009. For the long-term view and how gold and silver play into this outlook, check out the Trading Guides page.
Taking into consideration the invalidation point (stop) and points of support (targets), risk/reward is skewed favorably.
Heads up: Tomorrow the RBNZ meets, and while no adjustments are expected, and it’s likely we see limited volatility following the event, traders should still be mindful when managing risk.
Created with TradingView
Entry: At market
Stop: 7005 (Above both trend-lines)
Targets: 6695, 6595/70 (Placed slightly ahead of noted support levels)
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---Written by Paul Robinson, Market Analyst
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.