Trade Idea: NZD/USD Reversal Correction

With all this talk of a possible RBNZ rate cut, I’ve got my eyes locked on this pullback short opportunity on NZD/USD. Forex Gump shared a few good reasons why New Zealand’s central bank might be gearing up to lower rates next month so I’m sticking to my bearish bias on the Kiwi.

As I’ve shown y’all in my Comdoll Trading Kit this week, the pair formed a double top pattern on its 4-hour time frame, a classic sign that a downtrend might be in order. Price already broke below the neckline around the .6800-.6850 area and dipped to a low of .6717 before making a retracement.

NZD/USD 4-hour Forex Chart

NZD/USD 4-hour Forex Chart

NZD/USD also broke below a long-term rising trend line which now lines up with the 50% Fib level and is close to the .6900 major psychological mark. Stochastic is on the move up so a correction is still in play for now.

New Zealand has its quarterly retail sales figures up for release in the next Asian session so this pair could undergo some volatility. Headline retail sales could show a 1.0% gain for Q1, lower than the earlier 1.2% increase, while core retail sales might print a 1.1% rise versus the earlier 1.4% figure.

I’m looking to short around the 50% Fib (.6865) with a stop past the .7000 handle and an initial profit target near the swing low. I’m open to aiming for new lows but I’ll be watching the trade closely and trailing my stop then. After all, the U.S. has a couple of top-tier data points (retail sales and PPI) on Friday’s schedule and China is set to print another batch of reports (industrial production, fixed asset investment, and retail sales) over the weekend.

Here’s my plan:

Short NZD/USD at .6865, stop loss at .7015, first profit target at .6715 for a potential 1:1 trade. I’m risking 0.5% of my account on this setup so make sure you read our risk disclosure if you’re joining me.

Cheers,

Happy time

Other Popular Articles:   

Comdoll Trading Kit Forex Trade IdeaWhat is the STA strategy?Q4 2015 in Review