After last weeks failed Trade on the NZD/USD we are going to make another attempt to short the major pullback we saw after Friday’s news release and Bernanke's speech.
At the start of this month the NZD/USD clearly broke the strong uptrend we see form since the start of June as can be seen on the daily chart below.
Now if we look at the 4 hourly and the hourly charts below We now have a Fibonacci retracement drawn from the high of the 18/08/10 which also acted as a support level turned resistance to the low of the 25/08/10.
The pair has since tested the 78.6% Fibonacci retracement level where price was then rejected and has now broken below the 61.8% Fibonacci level in conjunction with the psychologically significant 0.7100 price level.
Now for our entry!
Ideally We were looking to enter on the break of the 61.8% Fibonacci level, i personally managed to just get in at 0.7098 but anywhere within 10 pips or so would still be ok for entry on this trade.
As for our stop loss we are looking to place it slightly above the most recent high at 0.7133, i personally have placed my stop loss 50 pips from my entry at 0.7146.
we are looking to place our initial take profit just above the most recent low at 0.6946, I have placed mine 140 pips from my entry at 0.6956.
This trade has an approximate reward : risk ratio of 2.8: 1
Don’t be a stranger and remember to leave a comment with your thoughts and feedback!
Happy trading, Lee J Brown
http://www.profxblog.com/
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