The NZDUSD is setting up a nice sell trade. As a result of today's data we saw a bearish impulse and although it is too soon to tell this might just be setting up for a nice leading diagonal lower. Overlaps are allowed in a leading diagonal and I'm interested in selling the next leg lower (5th wave lower). This would also indicate more bearish momentum to be next. But keep in mind that like I said it is too soon to tell but something to keep in mind for trading next week. I'll be looking for a sell after this consolidation comes to an end.
Guy's since we are all excited about the rate decision of the RBNZ let's have a look at the scenario's based on structure. First scenario: a leading diagonal lower for wave 1 (this is the red wave count and might present a sell trade soon). After a leading diagonal we often see a sharp correction for wave 2. Second scenario: we see the beginning of a bearish extension (this is the green wave count and also might present a sell trade soon). Third scenario; the market will see a surprise from RBNZ and reverse bullish again (this is the orange wave count for an ABC, this also will present a sell trade soon but short lived)
use a tradeplan and manage the trade or wait and let it all settle and trade the trend after the next consolidation.
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The ABC wave count in orange happened to be the correct one. I'll update prior to the RBNZ rate statement. Hope this charts showed how to keep an open mind especially up to a major event, so manage the trade accordingly to the possible scenario's. However bigger picture and outlook for Kiwi didn't change.
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Example of how to trade NZDUSD later today (it is an example and we will see more price action but the concept remains the same. You can either use a pending order if we see a clear impulse-consolidation or be more conservative and let price settle first. Keep an eye on what structure is leading at the moment on the 4 hour time frame: Also have a look for context and my bigger picture post of a month ago:
Comments
giamtra
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what do you think about the coming NZD news ?
TimStuyts
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The RBNZ implemented the macro-prudential rules for the housing market so they can lower the interest rate. But it is all relative which means that the market is expecting the RBNZ to cut rates. So if the statement is dovish we might see a strong drop in NZD pairs, on the other hand however if it remains neutral we might even see a stronger NZD. So therefore I've an adjusted trade plan when it comes to trading major news events, I target spikes or continuations to enter or don't trade at all and let it all settle (because it is all about risk/reward and I therefore don't care for pips). But the statement will clarify a lot about the near future and what to expect. Fundamentals matter in Forex and sometimes it is the reason for a reversal and sometimes a confirmation of what already happened. What I mean is that the macro-prudential rules for the housing market resulted in the bearish reversal about a month ago, IF the RBNZ is dovish in their statement we will see the confirmation. So this is why I mentioned a month ago 'the NZD is going down although it might correct strong'. We saw that exactly happen and now we can see that also in terms of structure. Impulse lower, consolidation and impulse next is what we expect. So combining it all makes you realize what set-up based on structure is more likely to be successful than the other. This combination increases your probability. You notice I still talk about probability no matter what. But I rather have two aces at hand than only one.
ruthrajamanie
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seems like the wave 4 in now completing.. are we waiting for a breakdown at a lower TF?
TimStuyts
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You can look for a sell trade on lower time frames for this wave 5 lower, that's correct. Impulse-consolidation-impulse. I will update tomorrow prior to RBNZ rate decision.