NZDUSD: Rebound Towards Support on .7700 Continues Yet Pair Still Trading Inside Bearish Channel
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 .7648 around time of publication today.
Last time this pair was reviewed in Ideas You Can Trade was at the end of 2014, when there was bearish pressure on .7700, and the trend subsequently moved lower. Since establishing a double-bottom area of support around .7200 over the last two months - NZDUSD has recovered towards current levels but is still within the medium term bearish channel (point 1 on chart below in yellow) -although has a good degree of momentum since its March 11th low.
While the very short-term momentum is bullish, this recovery may test the upper resistance line of the medium channel and either breakout or reverse, and support above .77 could also help to sustain the bullish momentum. The medium term trend is still bearish - as can be seen on the overall theme of the chart below - and any failure to hold above .7700 could cause an early reversal before the upper resistance line is met, as the medium term bearish trend may kick-back-in anytime.
Below are examples of how to trade a bullish continuation or a bearish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ .7701 with a Limit to take profit @ .7750 and a stop-loss @ .7652 Risk/Reward Summary: Limit risk = 49 pips profit / (-49) Stop-loss risk =Gain to Loss ratio = 1.00
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ .7599 with a Limit to take profit @ .7540 and a stop-loss @ .7651 Risk/Reward Summary: Limit risk = 59 pips profit / (-52) Stop-loss risk =Gain to Loss Ratio = 1.13
Medium term daily candle chart: