Catching NZD/USD’s Bullish Divergence

The Kiwi is sure flyin’ high, isn’t it? It’s time for me to hop in NZD/USD’s flight, as a bullish divergence formed on its 1-hour time frame. Price made higher lows while stochastic made lower lows, indicating a potential continuation of the ongoing rally.

NZD/USD Trade Idea

As Big Pippin pointed out in today’s Chart Art, the pair could still have a chance at testing the rising trend line and 61.8% Fib, which is right around the 0.8300 support level, so I set my stop below that area. I’m aiming for new highs since I think the rally has legs and fundamentals support a long Kiwi and short U.S. dollar bias.

For one, the FOMC just decided against reducing its bond purchases this month, as they predict that there are plenty of downside risks to U.S. economic growth. The RBNZ, on the other hand, gave a relatively hawkish statement recently and hinted that it could start hiking interest rates by next year.

Aside from the opposing monetary policy biases, I’m also diggin’ the interest rate differential between the Kiwi and the dollar. Who can say no to positive carry?

Here’s my plan:

Long NZD/USD at .8400, stop loss at .8280, profit target at .8600.

I’m risking 0.5% of my account on this setup and looking at a potential 1.67:1 return-on-risk. Check out our risk disclosure if you plan to take this one, too!

What do you think of this trade setup?

Happy time

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