The NZD/CHF pair is one of my favorite pairs to trade in what seems to be an increasingly interconnected marketplace around the world. This is because the two currencies are so diametrically opposed in their representations of risk appetite. On one hand, you have the New Zealand dollar, the currency the does very well in "risk on" type of situations. This is based upon the massive amount of commodities that the country sends out and around the world, and as a result this currency tends to follow commodity markets in general. On the other hand, you have the Swiss franc, which is more or less a "safe haven" currency. Because of this, when times get bad, this marketplace will shift in favor of the Swiss franc.
As you can see on this chart, we did see a significant selloff on not only Wednesday, but Tuesday as well. We have pulled back from the highs near the 0.8050 level. This is the second time we try to break above that, and we are now approaching significant support. It is because of that that I am watching this pair, because I think if we see supportive action near the 0.78 handle, we could see a return to the top of the yellow rectangle that I have highlighted on this chart.
Pay attention to global markets in general
In order to trade this market, attention to how the various stock indices around the world are doing. It doesn't need to be one that has anything to do with New Zealand or Switzerland, just simply pay attention to the overall "tone" of stock exchanges. If we start to selloff around the world, this pair will continue lower and we could find it falling significantly. However, this chart looks very well supported in the vicinity of 0.78, so what I am hoping is to see bullishness around the world, as it would line up perfectly with this currency pair and its expected reaction.
However, make sure that you are nice and patient for this trade. There will be a lot of crosscurrents going on around the world, not the least of which will be the central bank meeting in Brussels today. Nonetheless, we could get a nice set up here if you are patient enough to wait and see if the 0.78 handle can offer us some type of supportive candle.
