Got another simple technical setup on the longer time frames, this time on NZD/USD that could soon draw in more downside momentum.
Wedge Breakdown on NZD/USD
Looking at the daily chart of NZD/USD, we’ve got what looks to be a confirmation of the wedge breakdown that began a week ago. This is also a wedge that formed around the 38% – 50% Fib retracement area, so there were many technical arguments for the 0.6900 area to hold as resistance.
Now that we’ve got the break, is the more downside moves ahead for NZD/USD? Price action traders will likely continue to hop on this pattern for the time being given the bearish signal, and as for fundie traders, the upcoming New Zealand employment report next week could be the catalyst for additional moves lower, but first we’ve got advanced U.S. GDP that could take it higher given that the growth rate has been falling lower since the 4.2% peak in 2018.
With that in mind, and the likelihood that the recent down move may be exhausted based on the stochastic indicator, I’m looking for a bounce first before taking small position short on NZD/USD. The 0.6725 area has been a strong area of interest in 2019, so I’ll start shorting below that area.
My stop will be roughly one weekly ATR from my entry area, and my initial target will be the 2018 swing low just above the 0.6400 handle for a solid max potential return-on-risk. Here’s what I’m doing:
Short half position NZD/USD at 0.6650, max stop at 0.6820, max target at 0.6430
Short half position NZD/USD at 0.6725, max stop at 0.6820, max target at 0.6430
I’ll be risking only 1.00% of my account and my potential return-on-risk is about 2:1 if both positions are triggered. I’ll look to add further to the position or adjust quickly (i.e., cancel orders, close trade, reverse trade) depending on next week’s top tier U.S. and Kiwi data give us, and if I’m not in the trade, I’ll look into seeing whether or not cutting the orders or adjust my entry makes sense.
Stay tuned and as always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.
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