The Odd Couple
It would take you over 24 hrs to fly from Bern Switzerland to Christchurch New Zealand. Being located over 11,000 miles apart makes it difficult for these nations to have any direct economic ties or correlations between their currencies. When crossed what we get is a currency pair with unique trading patterns and both trending and range bound market environments.
Looking back at our daily chart we can see that the NZD/CHF has been trading in a down trend, moving lower off its highs established at .7774 back in November of 2010. Currently price has been moving higher off its March 2010 low at.6374 and has begun settling near its longer term trend line. As we move towards resistance, neither currency is currently willing to yield with a stalemate being created.
Taking price in to a 4hr chart, we can see that the NZD/CHF has been locked between the .7150 support line and resistance near .7030. This range has been maturing for nearly three weeks at this point, with both sides of the range now being tested three times. Generally speaking the more a support and resistance line is tested the more stronger they become. As long as price remains within these levels, traders will have a clear entry and exit point at their disposal. If price breaks through either point it will be time to head for the exits and search for a new strategy on this pair.
Due to the down trend developing on the daily, my preference is to take sell trades against resistance in our range. Orders can be placed between the .7150 - .7160 price range. Stops should be placed above resistance close to the .7180 price figure. Our profit targets should be set on the bottom of the range near .7030 or lower.
Alternative scenarios include watching for price to break out either above or below our range. Entry orders can be set on either side and wait for an impulse in either direction.
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.