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Kiwi bears are out to play now that political party New Zealand First decided to throw its support behind Labour instead of National, and I’m seeing this potential breakout setup on NZD/CHF.

Short NZD/CHF Idea

This pair formed lower highs and found support around .6850-.6900, creating a descending triangle on its 4-hour time frame. Price seems to be falling through the bottom already, indicating that a longer-term drop is in the cards.

This chart pattern is approximately 400 pips tall so the resulting breakdown could last by the same height.

NZD/CHF 4-hour Forex Chart
NZD/CHF 4-hour Forex Chart

Further Kiwi weakness is supported by fundamentals as fears of protectionist policies picked up after NZF announced its decision yesterday. Incoming Prime Minister Jacinda Ardern has previously talked about renegotiating the Trans-Pacific Partnership, banning foreign ownership of certain types of housing, and allowing fewer immigrants into the country.

These views are backed by the Labour party’s push to curb trade and migration, which have actually been key sources of growth for the economy in the past few years.

Meanwhile, the Swiss franc has been able to benefit from these political jitters, especially since the euro is also dealing with a few of its own. The pound has its usual slew of Brexit issues to contend with, leaving the Swiss currency the safe-haven of choice in the region once more.

I’m looking at a potential short around .6825 with a stop past the triangle resistance and .7000 handle. As for my target, I’m aiming for the next area of interest around .6400, which should give me a potential 2:1 setup. What do you guys think?

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