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.
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!