NZDUSD: Short-Term Bearish Momentum Meets Medium-Term Bullish Support Line
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 trading around .8445 around time of publication today.
Last week in the Ideas You Can Trade series, the NZDUSD was described as diving to find support, and since then has appeared to be testing support today on a long term bullish line (point 4 in green on chart below). That support line has reversed short term bearish price action on at least two occasions over the past year, and could be a viable barrier to further downside.
If the short term bearish momentum that persisted through most of last month can continue, then this support line should fail and thus enabling a bearish continuation. Whereas, if support on the long term bullish line holds, then a reversal should follow up a bullish line similar in slope to prior such recoveries, as plotted below on the chart (point 3 in aqua color).
Below are examples of how to trade a bearish continuation or a bullish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ .8514 with a Limit to take profit @ .8567 and a stop-loss @ .8469 Risk/Reward Summary: Limit risk = +53 pips profit / (-45) Stop-loss risk =Gain to Loss ratio = 1.17
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ .8399 with a Limit to take profit @ .8351 and a stop-loss @ .8437 Risk/Reward Summary: Limit risk = +48 pips profit / (-38) Stop-loss risk =Gain to Loss Ratio = 1.26
Medium term daily candle chart: