Spotted my usual technical trend setup forming on NZD/USD, which may pair well with an upcoming top tier catalyst coming from the Reserve Bank of New Zealand (RBNZ) this week.
Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.
We’ve got the RBNZ monetary policy decision this week, and while I don’t like to make predictions on any economic events–especially top tier ones–my main man Forex Gump made a nice argument on why we could see a cut this week. Of course, the Kiwi has continue to fall since that post almost a month ago, which means we could see a pop higher in NZD/USD on a “buy-the-rumor, sell-the-news” anticipation/reaction to this week’s event. Overall, I still like the Greenback against the Kiwi, but I’m going conservative with getting into a position by starting really, really small, and waiting for a pullback.
On the hourly chart above of NZD/USD, I pointed out a potential resistance area where the Fibonacci levels, falling moving average and trendline all line up. If there is a bounce this week, I’m going in short around that area. My stop will be a wide one of nearly one weekly ATR, and my initial target will be the recent swing low. Here’s what I’m doing:
Shorting a quarter position NZD/USD at .6650, max stop at .6800, initial target at .6500
I’m only risking 0.25% of my account on this one, and with this trade structure, I have a potential reward-to-risk ratio of about 1:1. After the RBNZ event, if I’m still in the trade and the story makes sense, I’ll look to increase my position size and trail my stop to maximize my gains safely.