Forex Trade Idea: Short-term NZD/USD Downtrend

Good morning forex friends!  Spotted a simple down trend setup on NZD/USD, which looks attractive ahead of catalysts from New Zealand this week.  Check it!

Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.

NZD/USD 1-Hour Forex Chart

NZD/USD 1-Hour Forex Chart

This is one of those run-of-the-mill forex trade setups, shorting in a downtrending market.  Keep it simple, right?  And with risk sentiment still in fear mode at the start of this week with global equities trending lower, this trade makes sense to take as a short-term setup.  I also like having some Kiwi shorts ahead of major catalysts coming from New Zealand, specifically the Global Dairy Trade price data and quarterly CPI coming early in the Wednesday Asia session.  Forecast on the CPI data is looking to coming in below previous, which could put some pressure on the Kiwi in the short-term.

Technically, there’s an argument for potential resistance starting around current levels, going up to the major psychological handle, .6500, thanks to falling moving averages and the Fibonacci retracement area.  And with stochastic already showing overbought conditions, I’ve decided to start scaling at market and up to the top of the potential resistance area to play the trend.  Here’s what I’m doing:

Short quarter position NZD/USD at market (0.6450), max stop at .6625, max profit target at .6250
Short quarter position NZD/USD at 0.6500, max stop at .6625, max profit target at .6250

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t follow what I do. Risk Disclosure.

I’m only risking 0.50% of my account on this one, and with this trade structure, I have a potential reward-to-risk ratio of about 1.57:1 if both positions are triggered. 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!

  • Marco

    Wow…Looking good so far. Where’s the $0.6250 come from?