Trade Idea: NZDCHF Triangle Breakout

With the RBNZ keeping rates unchanged and signaling that they’re not looking to cut anytime soon, I’ve decided to catch this NZD/CHF upside breakout.

As you can see from the pair’s daily chart below, price broke out of the symmetrical triangle formation after the announcement, signaling that it’s ready for more gains. The chart pattern is a little over 400 pips tall so I’m hoping to bag the same amount.

NZD/CHF Daily Forex Chart

NZD/CHF Daily Forex Chart

RBNZ Governor Wheeler mentioned that inflation expectations have stabilized since their previous meetings, hinting that they might forego any additional rate cuts they had on their timetable for this year. He added that their decisions are based on inflation trends and not the Kiwi’s levels, which suggests that policymakers aren’t so worried about currency appreciation for now.

Meanwhile, European currencies are looking weak ahead of the EU referendum since the uncertainty in the U.K. could spill over to the other nation’s in the region, including Switzerland. In addition, data from the Swiss economy hasn’t been so upbeat, as the CPI printed a meager 0.1% uptick versus the projected 0.2% gain while consumer spending has been tanking.

I’ve kept it simple with this triangle breakout play, going long on a rally past the .6800 major psychological resistance around the top of the triangle and setting my stop below the pattern’s support. Here’s what I got:

Long NZD/CHF at market (.6825), stop loss at .6625, profit target at .7225. I’ve risked 0.5% of my account on this setup for a potential 2:1 return-on-risk.

As always, don’t risk more than 1% of your account on a single trade and make sure you read our risk disclosure if you’re thinking of taking the same setups!

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  • forzion

    Finally some price action after months of ranging and consolidating. I was long few times with this pair, but usually got stopped out after break even without losses and without gains. Then I decided to hold it for testing how much swap interest can it generate so I am holding a small position on my demo account from begining of May when my key signal moving averages crossed to bullish setup. NZD is my favourites simply because of higher interest rate and CHF has one of the lowest interest rates with SNB actively trying to weaken their currency.

    Looking at the long term charts we were quite low and I think it can easily go higher if there would a stable sentiment for a while. I am considering only long positions at this pair. If I want to short NZD or go long for CHF then there are much better pairs than this. The interest rate difference simply works with this quite well.

    • Cyclopip

      Same here! I prefer to take advantage of the positive carry too when trading longer-term setups, and NZD is also my favorite. I’m a bit worried about the impact of the upcoming EU referendum on this one, though, since traders seem to favor CHF versus GBP or EUR these days. What do you think?

      • forzion

        I think that impact of Brexit on Euro Zone should be limited but you know that traders are betting as it would be a disaster to catch some PIPs. Worse it is for the GBP.

        And I think that SNB is the most succesful in weakening of their currency from all the central banks. Even if they does not say a lot they can intervene by buying other currencies and I think thats the point weakening CHF slowly but persistantly. So I look for any low as a potential to enter long term long.

        I am considering some kind of risk-off enviroment which can impact CHF more. We have seen that GOLD has surged these weeks even if USD was strenghtening so it can mean that some traders looking for safe havens and there CHF can be an option. And I do not trust the US economy these days.

        Everythings depends if there is no mayor change in enviroment so the risk management is key as always.

        • Cyclopip

          Thanks for sharing your thoughts! In the latest SNB statement, Chairman Jordan did say that they’re ready to use their tools if they need to in case of a Brexit. Same here, I’m not so sold on the US economy or the USD as a safe-haven. In any case, NZDCHF’s climb seems to be gaining a bit more traction but I’ve already closed all my positions ahead of the EU referendum. Still kept yours open?

          • forzion

            I have significantly reduced my positions ahead of EU referendum. I can go out of this with little gains even if I set my Stop below averages around 0,6650 so I do not care of this one and we are now at level of previous highs. For me this one is pretty safe now. Technically it looks still good, fundamentally, we can see some correction there, cause the risk sentiment these days.

            Anyway I am testing a new strategy these days because I changed job and completely need to change trade style to daily timeframe and this one is just my prefered carry from last few months because I was not quite brave and missed to go long the RUB against EUR in the beginning of the year.

            I am happy to have such an high volatile event as EU referendum these days because I can run it in extreme conditions before going live. And I need to find out a lot of bugs still there but looks promising. I still have few weeks ahead to get further.

  • Cyclopip

    Seems pretty risky to me, but that’s just my two pips! I’m not too comfortable about the idea of risking 600 pips for a reward of just 100 pips. Even though there’s a low likelihood of price actually hitting your stop right away, you can’t ignore the fact that surprise moves like central bank intervention or any big announcements can lead to sharp price action. Then again, if you have a “mental” stop or some other risk management strategy to close early and it works for you, as long as you’re able to manage your trade actively then you should be alright.

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