New Zealand Dollar Trading Strategy: Technical Reflex

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NZD Technical Trading Strategy

As we discussed in our prior market search NZDUSD has been painting a potential bearish flag in the monthly chart. The flag may be affirmed due economic slowdown in China, negative news on Fonterra and rate cuts by the Reserve Bank of New Zealand (RBNZ). We have been able to capitalize over GBPNZD in our recent forex trade alerts and we would like to draw our attention to other NZD pairs and crosses.

The RBNZ is due to release its monetary policy after the FOMC statement is released. There is a 50% chance for a rate cut at the time of this writing. The RBNZ monetary policy may initiate the heavy selling we are anticipating for the New Zealand Dollar in the Forex market. We cannot take NZDUSD based on the monthly chart, the chart demands -400 pips stop (approx.), which we find excessively large. We can attempt to capitalize over NZD potential weakness via the 4hr chart.

NZDUSD 4hr Chart

Please click on the chart to enlarge:

NZDUSD 4hr Chart 27/04/16

NZDUSD 4hr Chart 27/04/16

We will stress this is not a top a top Head-And-Shoulders (H&S) that we are attempting to capitalize on. We require NZDUSD to trade around 0.6955 if not higher in order to consider a short trade. Taking a trade at current levels means we need to bear in mind a potential recovery towards 0.6955 if not 0.7050, which is why the current levels are not accommodating a shot trade. We hope the FOMC statement will force short-lived gains in NZDUSD that will allow us to enter the market with a relatively tight stop. What must also be acknowledged is that the RBNZ monetary policy is released at 21:00 GMT, which means the spread will widen. As it is a possible short trade we must bear it in mind in the stop’s size.

NZDUSD is nesting on 0.6835, which is the nearest support but we are not seeking a long trade.

EURNZD 4hr Chart

Please click on the chart to enlarge:

EURNZD 4hr Chart 27/04/16

EURNZD 4hr Chart 27/04/16

As opposed to NZDUSD, Euro Kiwi has affirmed a reversed H&S in the 4hr chart. Taking the trade at current levels requires a significantly large stop, which is not what we are looking for.

The optimal price is anywhere between 1.6280 to 1.6340. The move lower could be as a result of the FOMC statement or a whipsaw reaction to the RBNZ monetary policy. If the RBNZ does not cut rates but warn easing measures could be taken in future meetings in the press conference that is sufficient to trigger a whipsaw reaction.

Entering at current levels is out of the question. We are debating whether to use an entry order prior to the FOMC statement but we are still uncertain if it is the best course of action. Unlike NZDUSD, as it is a possible long trade the spread is not a factor.

We will issue an email 15 – 30 minutes prior to the FOMC statement release to determine whether will use an entry order. Please note that the odds for a whipsaw reaction regardless of the FOMC statement’s impact are not low based on the charts we presented.

EURNZD Buy Limit Order

Please click on the chart to enlarge:

EURNZD 4hr Chart II 27/04/16

EURNZD 4hr Chart II 27/04/16

Entry order: 1.6310
Take profit: 1.6604
Protective stop: 1.6167
Risk Ratio (RR): 1 : 2.2 (approx.)
Estimated duration: 7 days

Please note that should EURNZD reach 1.6640 before reaching our entry remove the entry order.

Although it may take 7 days it can easily be less than 5 minutes.

27/04/16 UPDATE: EURNZD triggered the entry order and retraced higher as expected.

Please click on the chart to enlarge:

EURNZD 4hr Chart III 27/04/16

EURNZD 4hr Chart III 27/04/16

29/04/16 UPDATE: EURNZD is trading at 1.6370 at the time of this writing.

Please click on the chart to enlarge:

EURNZD 4hr Chart 29/04/16

EURNZD 4hr Chart 29/04/16

We are closing 20% of the long trade at market price. This is a risk management manoeuvre, we are expecting further gains in the currency cross.

29/04/16 UPDATE II: EURNZD is trading at 1.6404 at the time of this writing. We are closing 10% of the long trade at market price and shift the protective stop to the entry.

Please click on the chart to enlarge:

EURNZD 4hr Chart II 29/04/16

EURNZD 4hr Chart II 29/04/16

We are reminding this is an intraday entry and economic data is due from China over the weekend.

29/04/16 UPDATE III: As this is a 4hr entry it is not meant to withstand the gap on Sunday night unless we have a sufficient distance form the market. The risk is for a gap lower that will pierce through the protective stop loss order.

Please click on the chart to enlarge:

EURNZD 4hr Chart III 29/04/16

EURNZD 4hr Chart III 29/04/16

Although the cross may extend its gains until the daily close we would prefer exiting the trade. Had this been a daily entry we wouldn’t have been concerned. EURNZD is trading at 1.6417 at the time of this writing, we are closing the trade at market price.

New Zealand Dollar Trading Strategy: Technical Reflex

As EURNZD trade is closed this page can now be accessed by all traders. Open trades and relevant intraday strategies are restricted to members only. We have been providing trade alerts in the Forex market since May 2014.
New Zealand Dollar Trading Strategy: Technical Reflex

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New Zealand Dollar Trading Strategy: Technical Reflex

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New Zealand Dollar Trading Strategy: Technical Reflex