The NZDUSD has sold-off after setting a lower high inside of its resistance area which is visible in grey in the above H4 chart. The lower high was the result of a reversal rally after a breakdown occurred. The upper band of its Bollinger Band acted as an additional resistance level after it touched the top of its resistance area. The sell-off has now taken the NZDUSD to its new support area which is visible in light blue in the above chart.
Forex traders could see the NZDUSD attempting to enter a sideways trend which would allow the Bollinger Band indicator to catch up with price action. This currency pair could enjoy a much needed short-covering rally after the sell-off and forex traders could take the current support area as an excuse to realize floating trading profits and cover their short positions. Price action has been contained between its lower band and its middle band of its Bollinger Band indicator and a breakout above the middle band will result in a momentum shift.
Forex traders are advised to seek long positions at 0.7140 and below which will position their portfolios to take full advantage of the expected breakout above its support area which will result in a short-covering rally. Conservative traders may wish to wait for the breakout to occur above the middle band of its Bollinger Band Indicator. A take profit target of 0.7550 is recommended for a potential trading profit of 410 pips on the H4 Chart.
Forex traders should protect this trade with a stop loss level at 0.7000 for a potential trading loss of 140 pips which will result in a Risk-Reward (RR) ratio of 2.93.
Long @ 0.7140
TP @ 0.7550
SL @ 0.7000