Short term
Trade view / 06 June 2016 at 14:34 GMT

Kiwi is ripe, give it a squeeze

FX Trade Strategist / www.Loonieviews.net
Canada
Instrument: NZDUSD
Price target:
Market price:
Background

NZDUSD rebounded sharply following the weak NFP data on Friday and is now within spitting distance of a serious test of .7000-20, representing the downtrend line from the April 2015 peak. A failure at this level should lead back to the May low.

The Reserve Bank of New Zealand interest rate decision is due on Wednesday at 2100 GMT and there is a slight chance that rates could be cut by 0.25 basis points. Those odds may have improved with the weak NFP report trimming near term US rate hike expectations.

Big NFP price swings have a habit of reversing themselves in the following days and a less than dovish speech by Janet Yellen could see the dollar recoup its Friday losses.


This trade idea will work if NZDUSD strength is  tempered by either a hawkish speech from Janet Yellen on today or a RBNZ rate cut mid-week.


Management and risk description

This is a risky trade as NZDUSD is in a steep but well-defined uptrend from the low at the end of May which comes into play at 0.6875.  this is a counter-trend idea hoping that the NFP reaction is just temporary.  If not, it will go pear-shaped very quickly.

Janet Yellen may err on the side of caution and deliver a dovish speech today. If so, would lead to further US dollar selling and trigger the stop. The RBNZ may leave rates unchanged and that news would trigger the stop.


Trade idea parameters

Entry :Sell ½ position of NZDUSD at market (Currently 0.6935) Balance at 0.6985

Stop: 0.7040

Target: 0.6780

Time horizon: 5 days


Chart NZDUSD 30 minute highlighting intraday uptrend and take profit level
nzdusd
 Source: Saxo Bank

Chart NZDUSD hourly with 2nd sell level and stop loss noted
nzdusd
Source: Saxo Bank

Chart: NZDUSD 5 year daily with moving averages
nzdusd
 Source: Saxo Bank

— Edited by Clare MacCarthy

Non-independent investment research disclaimer applies. Read more
06 June
Estuardorlemus Estuardorlemus
The title.. LOL
06 June
Alejo76 Alejo76
I think is going in the opposite way....
06 June
Michael O'Neill Michael O'Neill
Alejo75, you may be right. That's what makes a market. I know I'm going against the flow. Janet Yellen's speech certainly keeps a July rate hike on the table. June appears to be off due to Brexit concerns and if the UK votes to Leave, July rate hike is unlikely as well.

Nevertheless, NZDUSD rallied a lon way, a correction is not improbable.
06 June
Alejo76 Alejo76
yeap. but the same other asian currencies.. and are all going up
07 June
IL IL
and what if RBNZ will cut the rate on thirsday? It does not look like much up to me
07 June
Michael O'Neill Michael O'Neill
You guys are all correct. NZDUSD can very easily go higher. But if it doesn't it will go lower.
07 June
andywielkiszu andywielkiszu
Lol
07 June
Estuardorlemus Estuardorlemus
NZDUSD might be overbought... maybe this can work
08 June
Michael O'Neill Michael O'Neill
Its D-Day for this trade; If RBNZ cuts rates, it should work out ok-if not-......
08 June
Estuardorlemus Estuardorlemus
You think raising the stop waiting for the RBNZ meeting ? Or get out if it gets triggered before the meeting ?
08 June
Michael O'Neill Michael O'Neill
Yes. I'm not usually a fan of changing levels in the middle of a trade. I would raise the stop loss to 0.7072. NOTE: This was a counter trend idea and therefore very risky. Now it becomes a roll of the dice. If the RBNZ cuts rates we will win. Raise the take profit level to 0.6850

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