This morning the Reserve Bank of New Zealand cut the official cash rate from 3.00% to 2.75% with implication from Governor Wheeler that further easing seems likely if things get worse than expected. With more rate cuts expected by investors, the Kiwi Dollar is vulnerable to extend its prolonged slump against the USD.

The strong downtrend on the NZDUSD monthly chart represents the trend with the strongest momentum in the Forex market today. Continuing to surf this strong flow is my top priority in trading the Forex market now. How far this might this trend extend? The 0.6000 level, a major psychological level, could be an achievable target in the coming months. Therefore, there are 300 pips potential profit window available for me to look to trade.

TWP 1 10 Sept 15

The rate cut spurred sellers to push the price against the low of last week around 0.6269 which has been penetrated once early this week. The interest rate decision was released after the USA market close. How institution traders in Europe and USA react tomorrow morning when they return to their trading desks will decide the fate of last week’s low. The last defence of NZDUSD is the major low on 24-August around 0.6242. If it cannot generate enough buying momentum once the price reaches there, then NZDUSD will have a high probability of a free run towards the 0.6000 level.

TWP 2 10 Sept 15

How am I going to plan my attack? Short term/intraday trading is my preferred way to trade as currently there is no ideal trade setup on the daily chart present. Also, if I can find a good entry and tight stop on the intraday time frames, the potential risk: reward ratio could be greatly in my favour. A convincing break down of last week’s low then a pullback to retest that level would be ideal. The same drill applies to the major low of 0.6242 as I will be looking to combine other technical factors together to look for a high probability trade setup to the short side.

The strategy I am using is called the trend flow strategy which can be applied to any market and any time frame. If you are interested in how we trade the market, feel free to join our Advanced Course – check the website for details.

Hao Sun