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Today’s Trading Edge: NZD/USD – Major Reversal Continues

Posted by Edward Moya on May 29, 2014 3:01:00 PM

WWM NZDUSD MAY 29 2014

Today’s kiwi selloff was spurred by the third monthly drop in the ANZ Business Outlook.  A bearish stance is finally becoming too popular amongst traders. 

Three weeks ago, I identified a key turning point for the kiwi.  The Reserve Bank of New Zealand said that they need to weaken their currency and price formed a bearish butterfly pattern.  The major reversal reached my downward target of .8572, which at the time was the 50-day Simple Moving Average (SMA).  The next key support level is now the 200-day SMA at .8342. 

With many late shorts jumping on this freefall, we will wait to see if we see some profit taking or a possible short squeeze allow price to temporarily recapture the .8500 handle. 

The kiwi plummet may eventually bottom out near the .8250 area, which is the 50.0% Fibonacci retracement of the September 2013 low to this year’s high of .8778.  Only a daily close above the .8600 handle and the 50-day SMA will end my bearish bias. 

The trade: Sell NZDUSD at .8520 with a stop loss at .8570 and a take profit at .8575.  The Risk/Reward Ratio is a little better than 1:2.

Edward J. Moya

Technical Strategist

WorldWideMarkets Online Trading

 

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