NZDUSD: Resistance on .88 Failing as Higher-High met after Yesterday's Bullish Move
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 as NZDUSD, and is trading around .8796 around time of publication today, hitting a fresh new multi-year high for the second day in a row.
Yesterday the pair overcame the high reached in June 2014 just under .8800 and traded even higher today, and above that prior resistance line and is just off session highs of .8816 this afternoon in the European trading session.
Longer Term Resistance exists near .8842 where the pair had last been reached on August 1st 2011, and which could remain a likely barrier to further upside.
Last time NZDUSD was covered in the Ideas You Can Trade series, dynamic resistance was described as testing the uptrend, and then had failed to reverse the bullish momentum, and since allowed the pair to trade higher.
While NZDUSD looks bullish, traders expecting a continuation may look for a break above .8800 to continue, whereas contrarian traders may expect a reversal if .8800 can provide resistance pushing the pair lower again.
Below are examples of how to trade a bullish continuation or a bearish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ .8814 with a Limit to take profit @ .8854 and a stop-loss @ .8781 Risk/Reward Summary: Limit risk = +40 pips profit / (-33) Stop-loss risk =Gain to Loss ratio = 1.21
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ .8765 with a Limit to take profit @ .8735 and a stop-loss @ .8794 Risk/Reward Summary: Limit risk = +30 pips profit / (-29) Stop-loss risk =Gain to Loss Ratio = 1.03
Medium term daily candle chart:
Longer-term view of same daily candle chart (zoomed out):