Trade Closed: 2010-01-18 21:48
Unfortunately, my NZDUSD trade didn’t get triggered yesterday as price was unable to make it past the psychological 0.7400 handle. Right now, the pair is more than 200 pips away from my entry point, which means that it probably wouldn’t get triggered anytime soon. The US dollar dominated yesterday, pushing commodity-based currencies such as the NZD lower. According to the TIC report, purchases of US long-term securities surged in November, indicating that demand for US assets grew stronger. Since this reflects investors’ confidence in US securities, the US dollar drew strength from the report.
On the fundamental side, the next major economic report in New Zealand will be the release of its fourth quarter CPI reading. Inflation is one of the major data that I look into since rising prices usually lead the central bank, in this case the RBNZ, to raise the interest rates. So with New Zealand’s 4Q expected to stay flat at 0.0% after coming in at 1.3% during the previous quarter, the RBNZ now will have less pressure to hike their rates.
On the technical side, resistance at the previous week high has remained intact as NZDUSD bears keep bringing the pair back down right after hitting, especially with stochastics going in and out of overbought territory. With that said, I plan to short the pair once it hits the top of the range, right at .7435.
Since this is a range play, I will put a tighter than usual stop and place it just above the resistance. My profit target, on the other hand, will be former lows at .7300, giving me roughly a 2:1 reward-risk ratio. Here’s what I will do:
Short NZDUSD at .7435, pt at .7300, stop at .7500.