NZDUSD: .8425 tested for first time since March, as Bearish price action returns
The daily candle chart below shows the medium term price history of the New Zealand Dollar (NZD) versus the United States Dollar (USD). This currency pair is known a NZDUSD, and is trading around .8430 (around time of publication) and lower for the 3rd consecutive day.
Since the high reached this year on May 6th just under .8800, after the prior high of April 10th was briefly overcome, NZDUSD has since been on a downward trajectory, with the latest low near .8425 reached today (.8416 so far) coinciding with the horizontal support line that has acted as both resistance and support on a number of occasions, and last breached earlier in March.
Last time NZDUSD was reviewed in the Ideas You Can Trade series, in late April, the reversal that was discussed on the .8500 level did subsequently occur, and the above mentioned high reached in May was achieved, before prices headd towards current levels.
If this horizontal support line where prices have arrived today - can provide a reversal, then a floor may be established for the pair to pivot on, and test higher -as that line has already proved to serve as a turning point before.
However, if support fails around the .8425 level, or just below it, then next stop could be near .8375 right near a 38.2% Fibonacci retracement line (as seen on the chart below).
Below are examples of how to trade a bearish continuation or a bullish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ .8501 with a Limit to take profit @ .8523 and a stop-loss @ .8479 Risk/Reward Summary: Limit risk = +22 pips profit / (-22) Stop-loss risk =Gain to Loss ratio = 1.00
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ .8398 with a Limit to take profit @ .8371 and a stop-loss @ .8419 Risk/Reward Summary: Limit risk = +27 pips profit / (-21) Stop-loss risk =Gain to Loss Ratio = 1.28
Medium term daily candle chart: