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Traders seem to be favoring the commodity currencies and showing no love for the Greenback lately so I’m looking at this short-term uptrend on NZD/USD. It’s shaping up to be a textbook pullback setup and the fundamentals are lining up neatly as well.

As you can see from the pair’s 1-hour forex time frame below, price has been trading above an ascending trend line and might be ready for a retracement. That’s somewhere around the 50% to 61.8% Fib levels, which happen to coincide with a former resistance level.

NZD/USD 1-hour Forex Chart
NZD/USD 1-hour Forex Chart

I’m also seeing a bullish divergence, as price formed higher lows from mid-April while stochastic made lower lows. I haven’t set any orders yet since I’m still waiting to see how price reacts to the .6900 levels, but I’ll aim for the previous high near .7050 if I’m able to go long. I’m planning to set my stop just below the swing low then.

Data from New Zealand has been mostly upbeat this week since the GDT auction showed a strong 3.8% pickup in dairy prices and visitor arrivals rebounded by 4.1% in March. As for the U.S. economy, last week’s set of top-tier reports (PPI, retail sales, CPI) all missed expectations so forex junkies appear to be pricing in downbeat remarks from the FOMC next week.

I’m still iffy on risk appetite, though, as market sentiment has been shifting on a dime these days. I’ll probably play this one carefully, ready to exit early if risk aversion seems to be making a comeback. Here’s my plan:

Long NZD/USD at .6925, stop loss at .6825, profit target at .7025 for a simple 1:1 trade.

I’ll be risking 0.5% of my account on this setup so make sure you look at our risk disclosure if you’re planning on joining me.


Happy time

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