Trade Update: NZD/JPY Short Finally Hits...

Last updated 10/15/2009 4:12 PM EST (GMT -5) 15 Comments

FX360 Technical Analyst Staff

Technical Analyst, GFT

It's been several weeks that we've been waiting on this NZD/JPY short to hit based on an emerging daily butterfly pattern which has now completed triggering our current short from 67.26. Since the last update back on September 23rd ( NZD/JPY Approaching 67.30 Resistance ), another converging bearish butterfly has emerged (in pink) which further strengthens this critical resistance. Due to the more recent price action, adjustments have been made to the profit targets which now sit at 64.19 (T1) and 60.42 (T2). Additionally, stops will be moved to break-even if prices drop to 66.07.

If this pattern fails--meaning prices move above this exceptionally strong ceiling stopping us out at 68.30---then the odds of a strong bullish continuation move increase significantly. So, since prices are currently hovering near pattern completion (between entry and stop-loss) any new shorts at this point depend on a close below 67.00. In other words, if prices from this point forward move above 68.30 then avoid this setup altogether as it is no longer valid. However, if prices from this point forward close below 67.00 then the current short is re-validated, so-to-speak, as this would likely ignite selling pressure.

Remember, even though prices are currently testing an extraordinary amount of resistance the market is always right. There are no certainties in trading as I'm sure we're all well aware of (especially when purely off technicals), so a reminder to practice disciplined risk/money management as it is critical to long-term success.

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Comments (15)

Irfan

October 15, 2009 at 05:23 PM ET

hi rogers,

can u pls confirm if there is still chance to get new entry after NY close..............or we stick with what we start this morning with the stop of 68.30 and target of 64.19

rstojsic

October 15, 2009 at 06:28 PM ET

hi irfan, i gues i would have to answer yes to both your questions since prices are currently hovering near pattern completion (between entry and stop-loss) any new shorts at this point depend on a close below 67.00. In other words, if prices from this point forward move above 68.30 then avoid this setup altogether as it is no longer valid. However, if prices from this point forward close below 67.00 then the current short is re-validated, so-to-speak, as this would likely ignite selling pressure.

m.hollingshaw

October 16, 2009 at 12:29 AM ET

I entered at 67.90 and was wondering, when would you recommend moving my stop up to break even? I know you have yours planned when it reaches 66.07 but as my entry point was different I didn't know if your approach would be different.

rstojsic

October 16, 2009 at 11:16 AM ET

right now :)

engin

October 16, 2009 at 08:41 AM ET

i see a gap between 68.70 and 67.20 normally it should be close.. right?? and pair broke up 66.30 so pair want to close that gap if its not break down 66.30 again. any idea ??

rstojsic

October 16, 2009 at 11:20 AM ET

not sure what gap you're referring to?

kukuruyuk

October 18, 2009 at 10:25 PM ET

hi rogers, if i enter sell now at 67.46, did your signal still valid? (SL 68.3 and TP 60.42) thx

rstojsic

October 19, 2009 at 11:08 AM ET

hi kuku, yes the short is still valid, but at this point stops should be around 68.0

DTuan

October 18, 2009 at 11:14 PM ET

We should take care about stronger NZD. Good Luck!

New Zealand Economy Will Be Stronger Than Expected, ASB Says:
http://www.bloomberg.com/apps/news?pid=20601081&sid=aaNPkp.uCR60
Will the NZ dollar continue to climb?
http://www.stuff.co.nz/business/market-data/2979314/Will-the-NZ-dollar-continue-to-climb

fxnewbie

October 19, 2009 at 07:29 AM ET

The setup was compelling, and the daily RSI was even showing that it's coming down from overbought condition at the close of the NY session on Friday. I'm afraid, however, that the fundamental is overriding the price action (just like Roger had mentioned could potentially happen in his writing).

rstojsic

October 19, 2009 at 11:07 AM ET

all good points re: fundamentals, but keep in mind that this trade is only expected to last a few days to perhaps as long as a couple weeks tops, so even if the fundamentals point to nzd strength we will still see some pullback aloing the way. however, this information may provide us a better idea of when to take profits (being far more conservative) so T2 may be out of the question, for example.

fxnewbie

October 19, 2009 at 11:28 AM ET

Thanks Roger

It looks like the pair is stubbornly clinging and threading around the overbought level in daily RSI. I'm hoping that it would start heading soon, before it hits the S/L point! :o)

m.hollingshaw

October 19, 2009 at 09:30 AM ET

Hi Roger, my break even stop has actually been reached now at 67.90 and I was wondering, given the 89 pip up turn it took do you think this trade would be a wise re-entry or just leave it be.

rstojsic

October 19, 2009 at 11:12 AM ET

i would say leave it be

fishmanszmit

October 19, 2009 at 01:09 PM ET

Hello R, I noticed a very similar trade recommendation came up today with the short NZD/JPY. Is that correct? Also, what if one enters now at a sell at 68.25? If we are expecting the NZD to drop again to 67.26 sell entry, is it too risky to follow it down from here? Stopped out after so many days and I had a good profit at one time.:( Oh well, good luck to us all!! Thank you.

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