RBNZ Cuts, EURO NZD Drops, PIPS Lie Ahead

After moving within a 400-Pip Range since the end of March this year, the EURO NZD has finally broken this boundary with a break of Support following the increase in interest rates by the Reserve Bank of New Zealand (RBNZ). The pair fell by more than 200 Pips within 24 hours of the decision to form a strong bearish candle below the Range, indicating the start of even stronger gains for the Kiwi in weeks to come.


THE RATE CUT

The RBNZ took the decision to raise the official cash rate to 3.25% from 3.00% as it seeks to stave off inflationary pressures that have begun to threaten the economy. In justifying the move, RBNZ Governor Graeme Wheeler stated that it was important that inflation expectations remain contained and that interest rates return to a more neutral level. Naturally, in an environment of homogeneous interest rate policy among the major central banks, the increase led to strong demand for the Kiwi against several of its counterparts including the US Dollar, the Aussie Dollar and the Great British Pound. Continued strengthening is expected for the Kiwi against these currencies, but the setup against the Euro appears to be very promising right now for aggressive Swing/Weekly Range traders.
RANGE BREAKOUT

 Looking at the chart below, we can see the bear candle that closed below the Support level following the rate decision. This is the type of signal that traders look for to open a position for a strong breakout, especially when it is sync with the existing direction of the trend.


DAILY CHART- EURO NZD BREAKOUT




















Most traders would probably starting entering short at this point, with the Stop Loss placed above the Support which would now act as Resistance to protect the trade. Entering early often gives traders a good opening price in case the market moves quickly in the expected direction. However, there is always the possibility of an unexpected reversal known as a False Breakout whenever we have a breakout signal from Consolidation. 

 Given this possibility and the fact that the last candle led to the Weekly Range of the pair being reached (see Trade Manual), it would be better to wait until another bearish signal appears after a brief pause or rally that tests the Support.


DAILY CHART - EURO NZD - POTENTIAL PULLBACK TEST


















This pause/test can either take the form of a rally followed by a strong U-Turn or a move sideways to form a small consolidation before breaking short. If either scenario unfolds, the ultimate target for this new downtrend would be 1,4855 -the Breakout Equivalent of the Consolidation (see Trade Manual). Along the way, several areas of past Support will be hit, allowing for short-term profit-taking as well.



Let's be patient, see what unfolds and take advantage of profitable setups when they appear.

RECENT EMAIL FROM CLIENT






____________________________________________________


SUBSCRIBE TODAY

____________________________________________________



Buy Now
US$120.00



Support independent publishing: Buy this e-book on Lulu.

Free 
 ___________________________________________


Duane Shepherd 
(M.Sc. Economics, B.Sc. Management and Economics)
Currency Analyst/Trader
Contact: shepherdduane@gmail.com
Twitter: @WorldWide876
Facebook: DRFXTRADING 

Comments

Post a Comment

Popular posts from this blog

SHARP GBP USD RALLY PREDICTED 7 DAYS AGO

Image
As predicted several days ago, the GBP has rallied sharply above major Support area of 1,2000 to start an uptrend that will take it up to the 1,2750 area by Wednesday January 25th, 2017. This is all part of the predicted  formation of a Consolidation Setup on the Daily Chart. In the screen shot of the Private Video Tutorials sent to DRFX Subscribers (www.drfxswingtrading.com), you can see the blue line used to indicate where I expected the rally. PRIVATE VIDEO LESSON - JANUARY 10, 2017 In the screenshot and Youtube Video below of January 18, you can see that the rally took the form of a strong Bull Candle - exactly where I predicted. PRIVATE VIDEO LESSON JANUARY 18, 2017 This projected Consolidation is based on the type of bullish and bearish waves on the Daily Chart. From the Trading Manual, you will see that there are certain types of waves that tell us when the market will form a Consolidation.
Read more

STRATEGY NOW UP BY 23.78% WITH RECENT 2.00% USD CHF TRADE

Image
This trade involved trading the False Breakout Reversal Setup that was taking place on the Daily and 4 Hour Charts last week, amidst the period of risk aversion across markets in reaction to the on going Coronavirus outbreak. This quick and aggressive trade took just 4 Hours in providing me with a 2.00% Rate of Return, just ahead of the Bullish Reversal that took place at Support. With this result, the new strategy is now up by 23.78% from just 14 trades, pushing me closer to the next major target of a 30% Rate of Return. As long as we carefully and patiently wait to only trade the setups with a High Probability of Success, large Rates of Return are possible for us in this difficult market.  VIDEO HIGHLIGHT OF THE USD CHF TRADE The main factors related to this trade that you'll seen in the Manual and in the more detailed Video Analysis available only to my subscribers were: 1. Accurately Identifying Consolidation
Read more

GBP CAD PROVIDES A 140-PIP TRADING GAIN FROM FALSE CONSOLIDATION BREAKOUT REVERSAL

Image
This successful trade took advantage of the sharp False Breakout Reversal from the Pennant Consolidation on the Daily Chart that started on December 3, 2015. As with all of these types of setups, the initial breakout attempt was quickly taken out by a strong, opposing signal that led to a breakout at the other end of the Consolidation. Given that this setup was in sync with the theory of False Breakouts that is outlined on Page 54 of the Trading Manual, the trade provided a strong gain of 140 Pips. The graph below shows one of the examples of False Breakouts that are explained in detail in the Manual. FALSE BREAKOUT SETUPS As you can see from the Daily Chart of the GBP CAD below, the setup was almost exactly the same as the one above.  DAILY CHART FALSE BREAKOUT PENNANT SETUP (FXCM Charts used to provide Entry Signals based on the New York Candle Close of the Daily Chart) Following the Bear Candle that attempted a breakout at Support, the bulls
Read more