Short-term trading idea FX NZD/USD – bull speculation: bounce from the support with a subsequent drop

Trading opportunities for currency pair: Last week the NZD departed channel 2 and fell to the lower limit line of channel 1 and channel 3. The support is a strong one, so we can consider movement against a bearish trend from the lower line of channels 1 and 2, with a target of up to 0.7240. It would be better to put a Sell Stop order at the stop level with a target of 0.6744 so that the long position doesn’t close and a short one opens. A close of the week above 0.7083 will be a good sign for the buyers. We could also avoid entering into any long positions and work using the down trend with targets of 0.6744 and 0.6672. For long positions against the trend we can reduce the lot we’re working with.

Current situation

The rate of the Kiwi dollar rose to 0.7485 in the form of a complex wave structure. After Trump’s election victory in the US and the FOMC meeting, the NZD/USD dropped from 0.7485 to 0.6931 (-554 points, or a fall of 7.4%).

Last week the NZD departed channel 2 and fell to the lower limit line of channel 1 and channel 3. If you take a look at the graph, you can see that after a large bearish candle, another one usually follows. From a technical point of view we would want to buy the NZD with a target of 0.7240. However the risks of a fall to 0.6744 are high. In this situation we should try and consider different tactics: on Monday buy NZD with a stop inverted to sell under 0.6900 and a target of 0.6744. If the long position doesn’t knock the stop off and the week closes above 0.7083, we can sit it out until 0.7240. Another possibility would be to not enter into any long positions and work using the down trend with targets of 0.6744 and 0.6672. For long positions against the trend we can reduce the lot we’re working with. After the completion of the upward correction, it’d be worth expecting a resumption of a fall in the NZD/USD rate.

Weekly graph from TradingView

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