NZDJPY: Bearish Pullback Tests Medium Term Bullish Support Line
The daily candle chart below shows the price history of New Zealand dollar (NZD) versus the Japanese yen (JPY), known as NZDJPY currency pair. The pair is just off session highs near 88.35 - a resistance level that coincided exactly at today's high, with NZDJPY currently hovering around 88.19 around time of publication.
Last time the NZDJPY was discussed in the Ideas You Can Trade series in late March 2014, it was noted as being technically more bullish, and 88.35 was noted as resistance, and then it did proceed higher yet only to find resistance under 90.00 before retreating back to then-fail on the support line that had been supporting the uptrend.
Since breaking below that line, the pair has corrected and found support for the second time in three days today on the bullish medium term channel (point 5 in white on chart) that has been the focal point of the momentum since last August.
If 88.35 is overcome and and genuine recovery follows, then a very short term bullish support line could develop (such as point 3 in yellow color on chart) to bring current prices back towards the series of bullish line above current levels near 90.00.
Below are examples of a how to trade a bullish continuation or a bearish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 88.40 with a Limit to take profit @ 88.95 and a stop-loss @ 87.99 Risk/Reward Summary: Limit risk = +55 pips profit / (-41) Stop-loss risk = Gain to Loss ratio = 1.34
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 87.51 with a Limit to take profit @ 87.20 and a stop-loss @ 87.79 Risk/Reward Summary: Limit risk = +31 pips profit / (-28) Stop-loss risk = Gain to Loss Ratio = 1.10
Medium term daily candle chart: