NZD/CHF just busted through a major psychological level on today’s RBNZ rate hike. Is this a forex breakout or fakeout?
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Of course, there’s no way to know until we know if this is the real deal breakout, but with the Swiss Franc in sell mode thanks to the ECB rate cuts (SNB potentially raising EUR/CHF floor), combined with the RBNZ throwing in the possibility of two more rate hikes, this is an opportunity to check out for a position trade. I feel the odds are pretty good forex traders will want to take advantage of the interest rate differential and monetary policy divergence that can be played with NZD/CHF.
With the new still so fresh, I’d still like to see how the Asia and European sessions will play it out, but for now I’m putting in an initial setup of orders to go long at the broken, major resistance level if I do get a pull back. My stop will be set to the weekly Average True Range, which would most likely be below that rising trendline and moving averages. My target is the next major resistance level at .8000, which was a major double top between 2012 and 2013. Here’s what I am doing:
Long full position at .7700, stop at .7550, profit target at .8000
Now there is a possibility that I may not get the pull back I hope for, and if that’s the case, I’ll create a different plan after seeing how the market plays out this week. But for now, this trade structure gives me a potential 2:1 R:R on my 1% account risk. Of course, anything can happen in the forex markets, so if the story changes I’ll be sure to reassess and adjust quickly if necessary. Stay tuned by following me on Twitter and Facebook!