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Forex: Ideas You Can Trade - NZDJPY Medium Term Resistance Tested

Posted by Steven Hatzakis on Sep 6, 2013 3:19:00 PM

NZDJPY:  Bullish Momentum Tests Medium Term Bearish Resistance Line

The medium term chart below shows the New Zealand dollar versus the Japanese yen. This pair is known as NZDJPY. As can be seen below, it has reached the upper resistance line of a medium term channel (point 4 in red) in the current session and trading near 79.23 (as of publication).

Over the past two weeks, the pair has been following under the ascending resistance line of a very short term bullish channel (point 3 in yellow) which could provide a continuation - if the resistance line of the medium term bearish channel (point 4) can be overcome. Additionally, a breakout above the very short term bullish channel (point 3) could enable the pair to target 80.50. Further resistance may be sought near the upper line of a medium term bullish channel (point 5 in white).

The resistance line of the medium term bearish channel (point 4) has provided resistance on multiple occasions. If it can hold again today and/or over the next few trading sessions, then a reversal of the current bullish short term momentum may follow. Such a bearish reversal may occur within a short term bearish channel (such as point 1 in purple). If a channel like this (point 1) developed, the pair may target the long term bearish support line (point 2 in dark red). Also noteworthy is further resistance may be found today on the upper line of a medium term linear regression channel (point 7 in blue) which coincides near todays high.

Trend followers may be expect the bullish momentum to continue (especially when viewed in the context of the medium term bullish support line having been regained earlier this week) and placing buying orders accordingly. Contrarian traders may be expecting the trend to reverse (on point 4) and place bearish orders accordingly.

 Below are examples of how to trade a bullish continuation or a bearish reversal:

1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 79.56 with a Limit to take profit @ 80.41 and a stop-loss @ 79.01 Risk/Reward Summary:  Limit risk = + 85 pips profit / (-55)  Stop-loss risk = Gain to Loss ratio =   1.54

2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 78.77 with a Limit to take profit @ 78.29 and a stop-loss @ 79.01 Risk/Reward Summary:  Limit risk = +48 pips profit / (-24) Stop-loss risk = Gain to Loss Ratio =  2.00

Medium term daily candle chart:

nzdjpydaily september 6 2013 note

 

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