NZD/USD: Waiting for Retracement

Trade Idea: 2011-02-12 2:10

NZDUSD head and shoulders

Let me guess what songs are on the Kiwi‘s party playlist this week. Off the top of my head, I’m thinking “Down” by Jay Sean, “Drop It Like It’s Hot” by Snoop Dogg, and “Take It To The Floor” by B2K, because it just fell almost two hundred pips against the Greenback! Judging from that head and shoulders formation on its 4-hour chart, I’d say NZD/USD had that coming!

Now I’m not a huge fan of breakout trades since I barely scored any pips from those setups last year, but it would’ve been nice to have caught that break of the head and shoulders neckline below .7700. I would’ve been up by close to a hundred pips by now if I had been aggressive enough to go for it, which means that I could’ve scored some extra cash to buy a new wardrobe for the Single Awareness parties I have lined up for this weekend! Then again, retracements are more of my style and I promised myself that I’d be patient and wait for a better entry price.

The problem is that NZD/USD doesn’t look ready to retrace just yet. You see, I’ve been drawing some Fibs from the shoulder of the formation until the recent low but I had to keep adjusting them because price just keeps making a new low after another. For now, I have my eyes set on a short entry around the .7700 broken neckline, but I’ll have to wait until the pair starts to retrace before I figure out my exact entry point.

Besides, the economic calendar shows that New Zealand has some hip events over the weekend, which could provide a reason for the Kiwi to pull up. New Zealand is set to report its retail sales and core retail sales on Sunday and these could print strong results, which could bring NZD/USD closer to my desired entry area.

Aside from that, China is set to release a bunch of economic reports, such as its trade balance and CPI on February 14, and upbeat figures could give the Kiwi some lovin’ on Valentines Day. I sure hope those figures print in the green, because when I go short Kiwi, I’ll be crossing my fingers that it’ll be my account’s turn to get some love!

For now, I’ll be waiting for signs of a retracement before setting my trade details. With all those shindigs I got lined up in the next few days, I’m pretty sure I’ll be awake almost the entire weekend so I can keep watch on this NZD/USD pair. Happy Valentines weekend, my friends!