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I spy with my one good eye this classic downtrend reversal signal on NZD/CHF. This setup lines up neatly with my fundamental biases, too!

Long NZD/CHF Idea

This pair bounced a couple of times off support around the .6700-.6750 levels, creating a sketchy double bottom formation on its 4-hour time frame.

Depending on how you draw the neckline, it looks like price has already made an upside breakout to confirm that bulls are ready to charge. This chart pattern is around 250 pips tall so the resulting uptrend could last by at least the same height.

NZD/CHF 4-hour Forex Chart
NZD/CHF 4-hour Forex Chart

However, stochastic is already closing in on the overbought zone to indicate that buyers are losing steam. Once it turns lower, the pair could still make a quick pullback to the broken resistance around the .6900 handle before heading further north.

NZD/CHF also seems to be encountering a roadblock near the .7000 major psychological level and area of interest, which suggests that it needs more backup from Kiwi buyers and franc sellers to sustain the rally.

Still, my fundamental analysis tells me that the Kiwi is just about as strong as the Golden State Warriors in this year’s NBA season. Of course I’m hoping that they don’t choke in the next game, just as I’m keeping my fingers crossed that risk appetite keeps up its momentum.

Economic data from New Zealand has been mostly upbeat while the RBNZ doesn’t seem inclined to cut interest rates anytime soon. On the flip side, further franc weakness could be in the cards as SNB officials have been in jawboning mode recently.

Moreover, I’m thinking that dollar weakness that could ensue after Comey’s testimony and on weakening Fed rate hike expectations beyond June could prop up the Kiwi. I know it’s a weird kind of market dynamic, but it does appear to be the case in the past few weeks!

Besides, European markets seem to be jittery lately owing to the U.K. elections, Greek debt drama, and Italian banking crisis. This could drive traders away from European currencies in general and towards currencies with better-performing economies.

Here’s what I’m planning:

Long NZD/CHF at .6925, stop loss at .6775, profit target at .7175.

I’ll be risking 0.5% of my account for a potential 1.67:1 return-on-risk. I’ll also be on the lookout for a strong upside break past the .7000 mark that might convince me to hop in at market if the setup still offers at least 1-to-1 R:R. Stay tuned!

 

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