Trade Closed: 2009-05-07 21:14
Boo Hoo! Well, it didn’t take long for the market to prove my technical signals wrong as NZD/USD continued to rally.
It’s all about commodities and commodity currencies as investors continue to pour money back into the markets. It appears investors believe we are past the worst, and while I still don’t believe we are because data is still bad, the “markets” are always right….right?
So, the rally continues and my short technical signals were invalidated as NZD/USD hit my stop at .5960.
Total: -153 pips/ -1.0% loss
It looks like fundamentals do not matter at this time, but what does matter is that the worst is behind…at least that is what the market is pricing in. Again, raw materials seems to be the play at the moment and this benefits the countries that export those materials like New Zealand, Australia, and Canada.
For the “Kiwi”, the next technical test is .6000, but if sentiment continues that may not be much of a problem. We’ll see! Stay tuned!
Trade Idea: 2009-05-05 15:45
Hello Forex Friends! I see some divergence on NZD/USD, signaling a possible reversal in the uptrend. We also have some employment data from New Zealand coming up on calendar which could bring some downward pressure to the “Kiwi.” Time to short?
On the four hour chart, we can see the “highs” in price action getting higher, but the “highs” in the stochastics going lower. This is called “regular bearish divergence,” and a signal that the pair may be headed lower. Also, there is a long-legged doji type candle, signaling indecision and that neither buyers nor sellers really won during that time period. This could lead to a potential change in the trend.
Fundamentally, New Zealand’s economy has felt the affects of the global recession as the first quarter looks to have contracted about 1%. Unemployment is forecasted by Reserve Bank Governor Alan Bollard to rise to a possible 6.8% by 2010. Some economists say we could see 8%. Whatever the case may be, this weakness prompted the RBNZ to cut rates last week from 3% to 2.5%, and possibly more at future interest rate meetings.
In the US, we have a couple of potentially action packed events with the US bank stress tests and US employment report. Both events could potentially lead to a shift back to risk aversion sentiment. The recent rally in risk may revert ahead of these events as traders take profits and positions off the table to avoid the event risk.
So, I look to short here at the market. My stop will be around the daily ATR of 170 pips and I will ultimately target .5500 and beyond. Here’s what I’m going to do:
Short NZD/USD at market (.5807), stop at .5960, pt1 at .5640, pt2 at .5500
Remember to never risk more than 1% of a trading account on any single trade. Please adjust position sizes accordingly.
Stay tuned and good luck!