Back
6 Aug 2013
NZD/USD short-term unclear while longer-term remains ugly
FXstreet.com (Barcelona) - The Fronterra fundamental news ruined a short-term bullish picture in a long-term bear market for NZD/USD. The short-term didn’t necessarily make it easy to be short, however.
NZD/USD was setting up for more of an upside correction when Fonterra happened
Heading into late last week, the NZD/USD cross was pulling back gently after a nice rally – which some technicians were identifying as a good opportunity to enter on the long side. However, Thursday’s close through first support was a yellow flag and Friday’s close cinched it – the bullish set-up was over.
Now, technicians are saying all of this action could be part of a larger upside correction in a long-term bear market. The problem for traders is that one scenario has NZD/USD trading all the way back up to 0.8000 before trading back to the July lows at 0.7682 while a second scenario has the lows being tested first and then moving higher. With the current level at 0.7834, that is more risk than many traders like to take on – especially in a case where a harmful decision out of China or Russia to block more New Zealand imports could send the cross spiraling downward through the July lows.
What to do here?
Most technicians are saying to wait for NZD/USD to have whatever rally it may and then look to enter on the short-side. In that strategy, the macro trend would be in your favor while the reward / risk on the trade would be greatly enhanced.
NZD/USD was setting up for more of an upside correction when Fonterra happened
Heading into late last week, the NZD/USD cross was pulling back gently after a nice rally – which some technicians were identifying as a good opportunity to enter on the long side. However, Thursday’s close through first support was a yellow flag and Friday’s close cinched it – the bullish set-up was over.
Now, technicians are saying all of this action could be part of a larger upside correction in a long-term bear market. The problem for traders is that one scenario has NZD/USD trading all the way back up to 0.8000 before trading back to the July lows at 0.7682 while a second scenario has the lows being tested first and then moving higher. With the current level at 0.7834, that is more risk than many traders like to take on – especially in a case where a harmful decision out of China or Russia to block more New Zealand imports could send the cross spiraling downward through the July lows.
What to do here?
Most technicians are saying to wait for NZD/USD to have whatever rally it may and then look to enter on the short-side. In that strategy, the macro trend would be in your favor while the reward / risk on the trade would be greatly enhanced.