Free Profitable Forex Newsletter
Hey! This is Philip with this week's trade idea of the Free Profitable Forex Newsletter!
A few weeks ago, we discussed the New Zealand dollar as a currency that could be a good sell opportunity. That materialized relatively well, driven by a surprise decision of the NZ Government to enact new restrictive regulations for the booming housing market.
The scope of the measures suggests this NZD bear trend may have further to run, as it will dampen growth to an extent and keep the RBNZ more dovish for longer. On the other hand, New Zealand is a country that managed the COVID-19 crisis very well, which enables its economy to operate more or less normally, while other countries suffered under lockdowns. This is why NZD was one of the top-performing currencies last year, but it was also heavily overbought before
its peak in February.
Thus the overall fundamentals for the NZD near-term aren't particularly clear from a directional perspective. The currency may now enter a prolonged consolidation period after retracing in February and March.
Bearish flag inside of a downtrend
While the fundamentals may not be as clear, the technical situation is much plainer. NZDUSD has fallen more than 500 pips since the peak on February 25, 2021. The downtrend has an orderly trajectory and is well contained inside of a downward channel (see chart).
The price reached the lower border (support line) of the channel on March 25 and is consolidating since then. But, the consolidation is so far shaping into a bear flag pattern, which in itself is considered a continuation pattern within a trend. Thus, the overall setup suggests NZDUSD is poised to move further down once this consolidation is over.
The clear trigger point for a short trade is a bearish breakout of the flag pattern. It is preferable that the downward channel stays intact when this trigger for the entry happens; however, it is not mandatory.
Particularly, there is a more important resistance zone just above the resistance trendline of the downward channel. It is located at 0.7150 area, formed by the convergence of the 55-day and the 100-day MAs with the weekly lows from January-March.
So, NZDUSD may go as high as 0.7150 to test the resistance without exiting the bearish trend. Under such a scenario, bearish setups around 0.7150 may also prove to be good shorting opportunity.
Below, we outline the specific trade plans for both scenarios, labeled as 1st and 2nd.
Entry:
- 1st: Wait for a bearish breakout of the flag pattern; Currently, the 0.70 level concurs with the support line of the flag pattern; therefore, a break of 0.70 is the preferable trigger signal for a short trade.
- 2nd: Wait for a test of the 0.7150 resistance; then look for a bearish setup or pattern to occur there as an entry signal
Stop:
Targets:
- 1st scenario: target 0.68
- 2nd scenario: target 0.70 and then potentially 0.68 if 0.70 breaks
Trade signals from the past week
- March 29, 2021 – Short Silver from $24.60 (in progress); trade idea sent on March 24
- April 8, 2021 – Short EURJPY from 129.95 on a break below 130.00 (in progress); trade idea sent on April 2
TOTAL: 0 pips profit in the past week
TOTAL: +3900 pips profit since October 1, 2018
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Thank you!
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Any opinions, news, research, predictions, analyses, prices or other information contained in this newsletter is provided as general market commentary and does not constitute investment advice. FX Trading Revolution will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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