Want more price action setups? Join our Exclusive Member’s Community
I’m going to keep today’s commentary light as we head into some extremely heavy event risk over the next several days. The event risk I’m referring to is tomorrow’s ECB meeting as well as Sunday’s Greek election.
Speaking of which, please take the Greek election into account if you plan on holding any positions over the weekend. I do expect to see some weekend gaps in at least a handful of currency pairs due to Sunday’s event.
As for tomorrow’s ECB meeting – to be honest, I don’t advise trading any Euro pairs, including the crosses until this event is past us. It just isn’t worth the risk. You’re better off waiting for the dust to settle before considering a trade on any Euro pair. That’s my 2 cents.
One last thing before we get started. Be careful using pending orders over the next 24 hours. With significant event risk comes unfavorable spreads. The last thing you want to do is start off a position being down 30 pips.
That said, two currency pairs that should be fairly well protected from the upcoming increase in volatility are NZDUSD and NZDJPY. I’m going to start with NZDUSD today, which is actually a pair I covered for Daily Price Action members yesterday.
I mentioned yesterday to watch for a break below support around the .7607 level. Sure enough the market broke below the key level early in the New York session. We’re now getting a bit of a pullback into a potential sell zone, which is the previous support level.
One reason I like this setup so much is the potential for a much larger move from NZDUSD. The chart below shows a potential double top that’s been forming since 2011. Of course we’ll need to see a break of neckline support at .7386 to confirm the pattern, but the implications are huge.
NZDUSD monthly chart:
Notice how the measured objective lines up perfectly with the lows from 2004 and 2006 as well as trend line support from 2000.
Summary: Watch for a pullback into the .7607 area. Bearish price action is preferred, although optional given the significance of yesterday’s break. Support comes in at .7468 with neckline support coming in at .7386. A break there would give us a long-term objective of .5926.