Trade Recommendation: NZD/HKD

The New Zealand Dollar/Hong Kong Dollar pair ignited its bull run on May 2009 when it took out resistance of 4.50. With a solid base below 4.50, the pair sustained a long uptrend that propelled it to as high as 6.89126 in August 2011. In just over two years, the New Zealand Dollar rose by 53% against the Hong Kong Dollar. Those who followed the trend started to take profits.

As the market succumbed to selling pressure, it dropped to 5.7469 in November 2011. The pair worked hard to stay above 5.80 support while creating a series of higher lows to keep its uptrend alive. With all that effort, however, the market could only generate a lower high of 6.84868 in July 2014.

The price action was a signal that bulls were exhausted. Participants began to dump their positions to preserve their capital gains. The heavy selling pressure forced the pair to snap 5.80 support in May 2015. From that point, the market posted consecutive red candles on the monthly chart until it found the bottom at 4.71929 in August 2015. NZD/HKD has been rallying since, and it appears primed to start another uptrend.

Technical analysis show that the New Zealand Dollar/Hong Kong Dollar pair is poised to take out resistance of 5.80 and trigger the large cup and handle reversal pattern on the weekly chart. Looking at the RSI, the pair is far from overbought territory. It has a lot of room complete the breakout and stay above 5.80.

The strategy is to buy the breakout at 5.80. If bulls complete the breakout, they will likely create a base and may crawl to our target of 6.75. The process may take a year.

Weekly Chart of NZD/HKD on OANDA

As of this writing, the NZD/HKD pair is trading at 5.65688.

Summary of Strategy

Buy: Breakout at 5.80.

Target: 6.75

Stop: 5.65 after the breakout.

 

Featured image courtesy of Shutterstock

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.