Expecting resumption of bullish momentum
Let us consider the New Zealand dollar/US dollar (NZDUSD) currency pair on daily timeframe. In 2014 New Zealand interest rates were raised four times. The New Zealand economy grew at 3.3% average rate in 2014 and is expected to grow at about 3% rate in 2015. On Wednesday the trade balance for March came in at 653 million compared with 83 million in the previous month. The Reserve bank of New Zealand left the interest rates unchanged at 3.5% while it said it could cut interest rates if domestic momentum weakened. After the decision the New Zealand dollar fell. March building permits were released couple of hours after the rate decision, indicating 11% increase from the previous month. Next Wednesday employment change and unemployment rate for the first quarter will be published, and domestic economic strength suggests solid job growth should continue. At the same time weak US economic reports push back the timing of Fed’s interest rate hike, providing additional support for the New Zealand dollar.
The NZDUSD pair had been moving within a channel with slight bullish bias since late January. The uptrend is confirmed by the RSI-Bars indicator which is rising within a bullish channel. The pair had been rising for the last three days before the central bank meeting. After the rate decision the pair fell, forming a bearish engulfing pattern on the chart. This pattern indicates a downward reversal, so the pair will most likely continue declining. At the same time the Parabolic indicator has not reversed and points in the direction of the green zone, and the slope of the Donchian channel also indicates upward momentum. We expect the pair will bounce back after hitting the support at 0.75313, confirmed by the lower Fractal, and the upward movement will resume with the pair breaching eventually the upper Donchian channel boundary and Fractal level at 0.7743. A buy pending order may be placed above that level. Conservative traders are recommended to wait for the resistance breakout on the RSI-Bars chart to get the confirmation from the bullish market. The stop loss can be placed below the lower Fractal level, which has formed at 0.75313. . After pending order placing, the stop loss is to be moved every day near the next fractal low, following Parabolic signals and Donchian channel. Thus, we are changing the probable profit/loss ratio to the breakeven point. If the price meets the stop loss without reaching the order, we recommend cancelling the position: market sustains internal changes that were not considered.
|Buy stop||above 0.7743|
|Stop loss||below 0.75313|