Throwing up NZD/USD for this week’s short-term idea with upcoming NZ employment data likely to add volatility to the recent downtrend.
Downtrend Pullback in NZD/USD?
On the four hour chart above of NZD/USD, we can see the pair went on a strong run lower from 0.6600 before forming a support base around 0.6450. This was likely due to the Coronavirus story driving risk-off sentiment, but this week those fears have faded a bit and traders are focusing on the liquidity injections from the PBOC to counter the likely economic hit from the Coronavirus story.
Coming soon, we’ll get the latest quarterly read on employment from New Zealand, which will likely get the Kiwi moving short-term. Since I’m still in the risk aversion camp as the Coronavirus situation doesn’t seem to be contained yet, I’m looking to play this pair to the short side if the market does pop higher.
I’m going with a conservative strategy with an entry at the Fibonacci retracement area marked on the chart above since I’m keeping this a short-term trade, with a two daily ATR stop. If the NZ employment data isn’t a huge positive surprise (expectations are for a quarterly net jobs ad of 0.3% vs. 0.2% previous), I’ll likely keep this trade/orders on through Friday to potentially grab volatility from the U.S. employment update. Here’s what I’m doing:
Short half position NZD/USD at 0.6520, max stop at 0.6620 with 0.50% max risk, max target at 1.6405
I’ll be risking 0.50% of my account if both positions are triggered for a potential 1.14:1 return-on-risk. If I’m in profit ahead of the NFP report on Friday, then I may adjust the trade (roll stop or close full position) to avoid event risk / maximize potential gain depending on the latest updates from the Coronavirus story.
That’s it for now. Stay tuned for updates 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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