NZD/USD: Respect the range until the Kiwi doesn’t

NZD/USD has been sandwiched in a 100 pip range in February
Despite the narrow range, momentum is building towards the upside

Some FX pairs like to gravitate towards big figures but not the NZD/USD. It’s clearly a fan of doing things in half big figure increments, as seen in the daily chart below.

Since late January, and despite a whole raft of domestic and international risk events in between, NZD/USD has been sandwiched between .6050 and .6150 throughout, respecting the range like clockwork whenever visited. Given the quirky price action and proximity to resistance at .6150, it presents an opportunity for traders to build a trade around.

NZD/USD may retest .6150 again soon despite another failure

Right now, the price action over the past 24 hours suggests another failure at .6150, allowing traders to go short with a stop above the level targeting a reversal down to .6050, where it bounced a couple of times earlier this month. The risk-reward is decent, especially given recent form.

However, with MACD and RSI trending higher, it wouldn’t surprise to see another retest of .6150 given momentum is to the upside. If that eventuates, it will allow for trades to be established depending on whether we see another rejection or topside break.

If the price falters again at .6150, you could sell below the level with a stop above targeting .6050. However, if we see a clean topside break, a retest of .6250 – where NZD/USD was rejected on eight separate occasions in January – could be on the cards should the 50-day moving average give way.

With known event risk largely absent this week, this is a potential trade idea to keep on the radar in the days ahead.

-- Written by David Scutt

Follow David on Twitter @scutty

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