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Forex: Ideas You Can Trade- NZDJPY Transitions out of Bullish Channel

Posted by Steven Hatzakis on Apr 24, 2014 5:09:00 PM

NZDJPY:  Slowly Exits as New Direction Emerges, Unless It's a Delayed Head-fake

The daily candle chart below shows the price history of New Zealand dollar (NZD) versus the Japanese yen (JPY), known as NZDJPY currency pair and trading near 87.58 (around time of publication).

Today's low coincided with 87.42, a horizontal support line, which also confirms that a lower-low has now occurred since the pair briefly exited the medium term bullish support line last time we covered NZDJPY in this series.

Since that last post, the bullish support line was recovered but just started failing over the last few days, with progressively lower lows, after resistance was encountered under a developed line that had been drawn in the previous post (red line above current prices), and consistent with the slope of similar short term bearish trend lines over recent NZDJPY history, as can be seen in the chart below.

This [red] line, combined with the short term bearish channel (magenta colored line below), forms a widening channel, also consistent with previous such channels that broaden or expand over time, and thus could mean that NZDJPY may be heading lower, unless the gradual exit of the channel that is just starting to happen - is a delayed head-fake or false-breakout, and a recovery to the upside promptly follows.

Therefore, traders may be eying 87.42 to see if it holds, as well as if the support line that failed can be recovered, before deciding which way to play NZDJPY.

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

1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 88.08 with a Limit to take profit @ 88.35 and a stop-loss @ 87.86 Risk/Reward Summary:  Limit risk = +27 pips profit / (-22)  Stop-loss risk = Gain to Loss ratio = 1.22

2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 87.33 with a Limit to take profit @ 87.05 and a stop-loss @ 87.59 Risk/Reward Summary:  Limit risk = +28 pips profit / (-26) Stop-loss risk = Gain to Loss Ratio = 1.07

Medium term daily candle chart:

nzdjpydaily april 25 2014 note

 

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