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Thomas Long, Course Instructor

The daily chart shows a strong move down through a number of support levels and the 200-day Simple Moving Average which would mean a downtrend and a selling bias. But at the same time, the move down was part of the "rush to the exit" mentality we saw in all financial markets last week. There is a selling opportunity here, but I do think we need to see that the sellers are in charge of this pair before entering into the trade. To me that means a move down through a previous low as noted on this 4-hour chart.

nzdusd 052710

If this market is able to reverse here before moving up through the .68159 high, that might be confirmation that the downtrend is real and tradeable. I would look to sell either on a move down through the .65598 low or if even the .6604 low if I felt more aggressive in my analysis. A move up through the .68159 high would not mean that this market is in an uptrend, but would result in taking a step back to reevaluate. Stops should be placed above this current high or above the .68159 high with targets to take profits set at twice that risk for our 1:2 risk:reward ratio.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.