It looks like the long-term area of interest on NZD/USD is holding as support, thanks to bearish dollar vibes and upbeat data from New Zealand.
Long NZD/USD Idea
Earlier this week, I shared a watchlist idea on NZD/USD’s descending channel break and retest, and it looks like price is starting to gain bullish momentum. The 38.2% Fib near the .7250 minor psychological mark appears to have held as support already while stochastic is indicating oversold conditions.
If Kiwi bears take over, the pair could head back up to the swing high at the .7550 minor psychological resistance. A larger pullback, on the other hand, could still lead to a test of the .7100 handle closer to the broken channel resistance and the 61.8% Fib.
Zooming in on the 1-hour chart shows that price already broke past the descending trend line that has held since late July. This signals that bulls are gaining the upper hand and might be ready to sustain a reversal from the drop.Economic data from New Zealand has been mostly stronger than expected lately, with quarterly retail sales showing a pickup in consumer spending for Q2 and upbeat PPI hinting at upside inflation pressures down the line.
On the flip side, the Greenback has been bogged down by the FOMC minutes as policymakers refrained from committing to a date for the balance sheet runoff. There were also some lingering concerns on weak inflation, casting doubt that the central bank could be able to hike rates next month.
To top it off, another round of political risks seem to be stemming from Washington as the fallout from Trump’s handling of the Charlottesville events continues. There have been rumors that top officials in the administration are also looking to jump ship, once again weighing on fiscal policy reform expectations.
I’ve hopped in a small 0.25% position at market while setting another buy order at the .7125 mark. My stop is below the .7000 mark and my target is at .7550. This should give me an average entry price of .7225 and a potential 1.3-to-1 R:R. What do you guys think?
See also: Q2 2017 Trading Performance Review
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