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My NZD/USD Trading Plan

My NZD/USD Trading Plan

From Hao Sun at Trade with Precision:

The New Zealand Dollar has been the ‘superstar’ of the forex market this week! It has continued to strengthen against all of its trading partners. There is also the Non-Farm Payroll news release occurring later this evening which could set up an interesting move on the NZD/USD. Let’s take a look at my plan for this currency pair.

NZD/USD has been stuck in a wide trading range, between 0.6300 and 0.6900 since last September. Thanks to the Fed Chair, Yellen’s speech two days ago, NZD/USD has broken through this trading range and the major resistance level of 0.6900. Today, we continue to trade above it with yesterday’s candle closing above it too.

Assessing the price structure of the daily chart below, I like the fact that there is a good structure (marked by a dashed line) which illustrates a resistance level formed by 4 prior touches at, or around, the same price. Now that price is above this resistance, it should act as support or a base. Not only that, there are two higher lows that have formed into this breakout (indicated with blue arrows). This is significant as based on my trading rules, moves with a good base are usually more sustainable and often have a higher chance of continuing in the direction of the original breakout.

20160401 twp1

Here are the four scenarios I am going to use to track NZD/USD for the rest of the day and into next week:

Scenario One: On the 1-hour chart, price has formed a nice flat level at 0.6965 with two precise touches. If price approaches the same level for a 3rd consecutive time and consolidates with small, indecisive candles, then a potential momentum breakout trade may set up.

20160401 twp2

Scenario Two: On the 4-hour chart, price has already pulled back into the moving average buy zone and I am stalking 0.6900 for a potential trend flow setup. Credence is added to this trade idea as 0.6900 is now a strong psychological level, the old price support level on the daily chart and the 50% Fibonacci retracement level all cluster together. I am anticipating a bounce off of this cluster of support in the direction of the uptrend.

20160401 twp3

Scenario Three: The US will release the March Non-Farm Payrolls number today, if price breaks through 0.6965 on the 1-hour chart with strong momentum after the news release, then I will look for other technical factors lining up with 0.6965 such as Fibonacci retracement levels for a potential long trade setup.

20160401 twp4

Scenario Four: Price reverses back into the large trading range on the daily chart after the news, at which time I will reassess the options available to me – if any at all.

20160401 twp5

I believe today’s Non-Farm Payroll will have a large part to play in the near term momentum of the greenback. Let’s see if any of these scenarios will play out today. Remember: Plan your trade and trade your plan!

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