NZDUSD: Bearish momentum resumed in down-channel after .7700 lost, and support on .7420 tested again
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 .7485 around time of publication this Friday.
Last time NZDUSD was reviewed in Ideas You Can Trade a break-out above .7700 happened just over the upper-line of the bearish channel (point 1 in yellow on chart below).
Since then NZDUSD failed to stay above .7700 and a sharp drop followed, and the bearish channel was re-entered, and the pair has traded lower in six of the last eight eight sessions. Today the low coincided with a support line around .7420 which was tested for the second day in row - although has since bounced towards session highs today under .7500.
If support on today's low fails a lower-low should follow - as that line had previously enabled a reversal. However, if the recovery off the session low continues - then the bounce that has already begun could be sustained higher - yet the pair still faces resistance under both .7500 and the upper line of a steeper bearish channel (see purple channel on chart below) both of which intersect near today's high of .7499.
Below are examples of how to trade a bearish continuation or a bullish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ .7506 with a Limit to take profit @ .7536 and a stop-loss @ .7482 Risk/Reward Summary: Limit risk = +30 pips profit / (-24) Stop-loss risk =Gain to Loss ratio = 1.25
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ .7418 with a Limit to take profit @ .7389 and a stop-loss @ .7440 Risk/Reward Summary: Limit risk = +29 pips profit / (-22) Stop-loss risk =Gain to Loss Ratio = 1.31
Medium term daily candle chart: