NZDJPY: Regains Bullish Channel After Support Found Off Lower Parallel Line
The daily candle chart below shows the price history of New Zealand dollar (NZD) versus the Japanese yen (JPY), known as NZDJPY, and is trading currently at 86.07 (as of publication) for the first time in weeks. This level was last seen before the pair had exited the medium term bullish channel (point 5 in white on chart) that has been the the epitome of its trend direction over the last few months.
Last time NZDJPY was covered in the Ideas You Can Trade series, the support line of the medium term channel had been breached and prompted a bearish exit. Since then, the pair recovered after finding support on a line parallel to the medium term bullish channel, and enabled the pair to regain current levels just above 86.00.
This may indicate that the pair has now regained the uptrend channel that had previously sustained its momentum, indicating a bullish continuation.
Alternatively, if support above 86.00 falters, then the failure to stay within the bullish channel could reverse the bullish recovery that started in early February, with the pair heading back to 84.00 for support and with further support just above 81.00 near those lows reached earlier last month.
Below are examples of how to trade a bullish continuation or a bearish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 86.35 with a Limit to take profit @ 86.98 and a stop-loss @ 85.81 Risk/Reward Summary: Limit risk = +63 pips profit / (-54) Stop-loss risk = Gain to Loss ratio = 1.16
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 85.51 with a Limit to take profit @ 85.09 and a stop-loss @ 85.82 Risk/Reward Summary: Limit risk = +42 pips profit / (-31) Stop-loss risk = Gain to Loss Ratio = 1.35
Medium term daily candle chart: