I’ve got my sights on a sketchy NZD/CHF double top pattern on its long-term chart, but I might still have a chance to enter on a quick pullback before it breaks down.
Short NZD/CHF Idea
On its daily time frame, NZD/CHF is already testing the neckline of its double top pattern around the .6750-.6800 levels. This lines up with a former resistance from last year that is holding as support for the time being.
However, a downside break of this area of interest could pave the way for a move to the next floor around the .6450 minor psychological mark. Stronger selling pressure could even take the pair down by around 500 pips or the same height as the reversal chart formation.
Zooming in to the 1-hour time frame suggests that there could still be room for a pullback before Kiwi bears come out in full force.
A descending trend line can be drawn to connect the highs of price action since July this year, and this resistance area lines up with the 50% to 61.8% Fibs on the latest swing high and low. To top it off, it’s also around the area of interest at the .6850 minor psychological mark.
Stochastic is already turning lower from the overbought region on this time frame, signaling that sellers are ready to hop back in. This suggests that a shallow correction might be underway, probably just until the 38.2% Fib.
By the looks of it, the Kiwi is currently being propped up by short-covering from weeks’ worth of declines. Event risks from New Zealand this week include the release of the RBNZ Financial Stability Report, ANZ business confidence index, and the quarterly overseas trade index.
Meanwhile, the Swiss franc has medium-tier reports like the UBS consumption indicator and Credit Suisse economic expectations index for the first half of the week before the Q3 GDP is released on Thursday.
Analysts are expecting to see a 0.6% growth figure, twice as much as the earlier 0.3% expansion, which might be franc bullish. Besides, the franc has also been able to benefit from safe-haven flows while traders remain wary of placing their bets on the U.S. dollar.
Here’s my plan:
Short NZD/CHF at .6825, stop loss at .7025, initial profit target at .6475.
I’ll be risking 0.5% of my account on this setup for a potential 1.75-to-1 R:R. What do you guys think?
See also: Q3 2017 Trading Performance Review
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