Do you think the strong dollar rallies are over? If so, you might like this swing trade idea I’ve spotted for NZD/USD!
The pair has formed a double bottom chart pattern on its 4-hour forex time frame, hinting that a long-term reversal is underway. Price seems to have broken above the neckline resistance at the .7600 major psychological handle already, which confirms that further gains are likely.
If an uptrend does take place, the pair could be in for around 400 pips in gains, which is roughly the same size as the formation. I haven’t placed any orders in though, as I’m still grappling with the fundamentals on this setup.
You see, both the Fed and the RBNZ are relatively upbeat compared to the rest of their central bank peers, as neither is looking to cut interest rates anytime soon. While the Fed is still expected to tighten monetary policy sometime this year, forex traders seem to be disappointed that the latest FOMC statement hinted that a rate hike might take place in September instead of in June.
With that, risk appetite returned to the financial markets, as a longer period of low U.S. interest rates could keep lending and spending supported. The higher-yielding Kiwi could benefit from this outlook, which might allow the NZD/USD rally to carry on.
Do you think my analysis makes sense? Or am I guilty of confirmation bias?
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