Partner Center Find a Broker

NZD/USD bulls fail to break a major resistance area once again. Is it back to the bottom of the longer-term range?

NZD/USD Falling to Bottom of Range?

NZD/USD Daily
NZD/USD Daily

I’m sticking to my bearish bias on the New Zealand dollar this week, but instead of shorting against the Canadian dollar as I mentioned in my Watchlist post last week, I’m taking a shot on NZD/USD.  I think today’s comments from new Fed Chairman Powell and the Greenback’s bullish reaction may give this pair some legs to move to play out a textbook technical setup.

The setup I’m talking about is a simple range play on NZD/USD. The pair has been moving sideways between .6800 and .7500 for a couple of years now, and the pair just found resistance near the top of the range to start 2018. With the bulls failing to break above .7400 and now downward momentum over the last week or so, I think I’ll take a short position here as I think the odds are in my favor for the pair to move lower.

My stop will be a bit more than the weekly ATR and above the recent swing highs to give the trade room to breath, and my target will be the bottom of the range to give me a nice potential return-on-risk. Here’s what I’m doing:

Here’s what I’m doing:

Short half position NZD/USD at market (.7234), max stop loss at .7434, max target at .6800 for a potential 2.17:1 return-on-risk

I’ll be risking only 0.5% of my account on this position and as usual, I’ll look to maximize the trade by adding to my position/roll stop up to max out the trade if the conditions continue to favor the U.S. dollar and the trade hits around 1:1 ROR. Of course, I’ll look to close out quickly if conditions or the data changes.

As always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.