NZDUSD Setting Up For 400 Pip Move

The last time I traded the Kiwi, it was easy to make money.
Price was falling off a cliff and you’d didn’t have to look too hard to find a reason to short. I had three medium- to long-term sell positions over the periods marked by the blue boxes below.

However, after bottoming out at 0.6200 in late 2015, the pair has struggled to form any long-term trend, and as a result, hasn’t been one of my favourites.

I think the fun is about to start again though.

A quick flip to the daily chart is very interesting. I’m going erase the last three days’ trade and show you what you would have seen at the close on Tuesday.

Let’s break this chart down.

  1. Price has been cracking along
  2. Barely even pausing at major resistance
  3. Up to a previous high just passed the 0.7300 mark
  4. And printed a beautiful bearish reversal pin-bar, on resistance, suggesting a double-top was in play, and we could expect further downside.

Turns out, that pin-bar was just a bear trap.

Here is price now:

Notice, reader, that had you sold at market (1) or set a sell order below the low (2) or done that thing where you wait for price to retrace 50% of the range of the pin-bar (3) and sold, you’re facing the same problem right now: You’re about to lose.

The lesson here is this:

When reversal signals fail, you’re still in a strong trend.

So technically, the pin-bar hasn’t failed yet. It’s holding on by a few pips, and who knows, maybe price will tumble as the US comes online today.

I don’t think it’s looking good for the bears though.

Four-hundred pips

Should price close above the high of that pin-bar (above 0.7343) today, or over the next few days, I will consider that reversal signal a big, fat loser. And, following the lesson I posted above, I will look for a long position, and attempt to ride it out to 0.7700

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