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The Kiwi Dollar Weakens - but which market should we trade?

By Tamar Mehr

The Kiwi Dollar has shown weakness across the board, staging a collapse against its major trading partners. A novice trader might jump on the south-bound train on the most commonly known pair - the NZD/USD. But more experienced traders will ask themselves the question, which pair presents the best trading opportunity at this point in time? Which pair allows for a higher probability trading opportunity, as per my trading strategy?

Let me take you through my favourite NZD chart at the moment – NZD/JPY - and share with you the reasons why this market has made it to the top of my watch list.

On the monthly chart below, we can see that though the uptrend was broken as the market again tested the 83.5 level, the bulls were unable to keep price above this level. The bears have begun to take control as price has started moving south with last month’s bearish candlestick already been broken by the low of this month. 

On the daily chart, price action is currently over-extended from its MAs, which could indicate that a pullback is on the cards. The momentum indicators are converging nicely to the downside, telling me there is still selling pressure. If we add the Fibonacci retracement tool to the latest move on the daily, we can see that the 61.8% retracement is clustering beautifully, with the breakout level at around the 80.50 level.My plan for the NZ/JPY is simple. I’ll be waiting for the market to release some of this strong selling pressure, while it pulls back to test the 80.50 clustered level from below, bringing the price action closer into the moving average sell zone, which is the area between the 10 and the 20 MAs. And I’ll be looking for a small bearish rejection candle of this level to indicate that the pullback is in high likelihood over and a new wave of selling could be on the way.

To emphasize my original theme - there is a time for every trade. The most obvious markets aren’t always the best ones to find good opportunities.


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