The trend has been a friend to NZD/CHF bears going back to early March, so is this latest bounce higher another short opportunity?
NZD/CHF to Return to Downtrend?
NZD/CHF bears have been getting paid over the past couple of months thanks to a combination of geopolitical risks growing (U.S.-China trade war, U.S.-Iran real war, Brexit, etc.) to support the Swiss franc and growing rate cut expectations for the RBNZ. We just actually heard from the RBNZ at their latest monetary policy statement today, and it looks traders speculated correctly as New Zealand’s central bank did signal that further cuts to interest rates may be needed.
The Kiwi actually rallied on the event, possibly on traders taking profits after their biases have been confirmed, but with expectations of further cuts to OCR down to 1.25%, or maybe even 1.00% by the end of the year, it’s likely we’ll see more downside pressure until the next RBNZ meeting in August.
As for the Swiss franc, it’s not likely we’ll see any direct catalysts from Switzerland or the SNB, so its price action will likely hinge on the euro and global risk sentiment. The latter will likely take precedent over euro influences, especially with a pretty boring calendar until the end of July when we’ll see the ECB meet once again.
With all of that put together, I’m in the camp that technicals and the bigger themes of geopolitical risk and RBNZ rate cuts will continue to prevail, for the next few weeks, and that this bounce is an opportunity to try the trend once again at a better price.
On the four hour chart above, we can see that NZD/CHF made its way back to a previous consolidation area (0.6535 – 0.6600), so there’s a chance traders may use this restest to play the trend and create resistance. I’ll be shorting the pair with a couple of nibbler positions, starting at current levels and up to the top of the previous consolidation range. My stop will be about one weekly ATR from my average price, and my initial target will be below the previous swing low to take some profit and/or adjust some other way depending on the themes at the time. Here’s what I’m doing:
Short NZD/CHF at market (0.6525), max stop at 0.6670, initial target at 0.6400 with 0.25% risk
Short NZD/CHF at 0.6590, max stop at 0.6670, initial target at 0.6400 with 0.25% risk
I’m only risking 0.50% of my account on this trade , and I’ve got a potential return-on-risk of around 1.57:1 if both positions are triggered.
What do you guys think? Let me know in the comments section below!
This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.