NZDUSD: Testing Bearish Support
The chart below shows NZDUSD testing the lower support line of a descending bearish channel (point 1 on chart) and failing to hold along a long term bullish support line (point 3) after re-entering a steep short term bearish channel (point 2).
Failure to find support along the bearish support line (point 1) could enable a continued descent to test the support line of the steeper bearish channel (point 2) which if violated could cause steeper price movement closer to the 0.7450 level (long term horizontal support).
The trend is bearish overall in NZDUSD over the short and medium term, and especially since breaking below the long term support line (point 3 -which is now acting as resistance) which unless regained - could engender a continued descent to look for support along both bearish channels (point 1 and 2).
Despite the bearish slope of both channels, their support lines could provide sufficient bounce to maintain trading within the down channels. A short term upside move in NZDUSD is possible within the medium term bearish channel although the long term bullish support line (point 3) may now act as “resistance” preventing a reversal from gaining momentum.
Below are examples of how to trade a bearish continuation if the trend continues or a bullish reversal if the trend reverses and bullish support lines can be regained.
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @.7820 with a Limit to take profit @ .7866 and a stop-loss to cut losses @ .7774 Risk/Reward Summary: Limit risk = +46pips profit / (-46) Stop-loss risk = Gain to Loss ratio = 1.00
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ .7665 with a Limit to take profit @ .7625 and a stop-loss to cut losses @ .7705 Risk/Reward Summary: Limit risk = +40 pips profit / (-40) Stop-loss risk = Gain to Loss Ratio = 1.00