The NZD was trading near highs it had not attained since July of 2017 late last week. Suddenly, a storm of selling emerged within the New Zealand dollar, which saw its value fall from near 0.74650 to a low of nearly 0.72215 on Friday. The fall in value occured within a day-and-a-half of trading, but the decline in the NZD/USD was not alone, as other major currencies suffered a loss of value against the USD also.
The sudden move downwards of the NZD/USD may have caught bullish speculators by surprise. A lesson potentially learned during late last week’s violent trading is that it is wise to have stop losses always working, and just as importantly, when profits are being made and a long-term position is being pursued, it helps to have trailing stop losses activated on trading platforms.
Trailing stop losses is a method that a speculator who is making money and does not want to close a position because they believe there is a chance more profits will be made can use. The trailing stop is implemented by increasing stop loss ratios as profitable positions mount. Safeguarding profits is a good way of guarding against unexpected movements in Forex.
The NZD/USD has experienced a very solid long-term bullish trend, but last week’s trading is a reminder that there are no one-way avenues in Forex. After opening yesterday and being able to produce a small reversal higher which may have felt appropriate to technical traders, the NZD/USD faltered again and the Forex pair now finds itself trading near short-term lows.
Intriguingly for NZD/USD traders is the notion that the Forex pair is hovering near short-term lows. Traders who believe last week’s results were part of a large global risk-averse move cannot be faulted. The NZD/USD has certainly proven capable of trading within an upwards direction long term. A simple glance at a six-month chart is evidence of the bullish track.
Late last week’s downward price action may not see an immediate reversal higher, but traders who believe the NZD/USD will soon begin to gather bullish momentum again may be making the logical decision. Traders should practice their risk management wisely, but upside potential compared to downside risks appears to favor buying positions of the New Zealand dollar.
NZD/USD Short-Term Outlook:
Current Resistance: 0.72690
Current Support: 0.72220
High Target: 0.73110
Low Target: 0.71750
