NZDUSD: Rebound from lower support line of channel testing another bearish resistance line near today's high
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 .7136 around time of publication today and near a fresh session high of .7142.
At the end of May when NZDUSD was last reviewed in Ideas You Can Trade .7200 was imminent and was subsequently reached - yet support on that line failed and a lower-low unfolded.
Since reaching the bottom of the overall bearish channel (point 1 in yellow on chart below) last Friday - with a low .7024 reached - the pair has rebounded today and the session high coincides near another bearish line - a short term resistance line (see red line on chart below).
The lower support line of the channel was mentioned in the last post - and could mark the reversal point for NZDUSD - and provided it can break-above the current bearish resistance line -then a bullish continuation should follow. Otherwise, if resistance holds on the short term bearish line near today's high, then the lower support line may be revisited before a real recovery follows - or a break below the lower support line which could accelerate the bearish trend and hamper a recovery.
Below are examples of how to trade a bearish continuation or a bullish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ .7149 with a Limit to take profit @ .7199 and a stop-loss @ .7099 Risk/Reward Summary: Limit risk = 50 pips profit / (-50) Stop-loss risk =Gain to Loss ratio = 1.00
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ .7080 with a Limit to take profit @ .7041 and a stop-loss @ .7105 Risk/Reward Summary: Limit risk = 39 pips profit / (-25) Stop-loss risk =Gain to Loss Ratio = 1.56
Medium term daily candle chart: