3 Reasons To Consider Shorting NZD/USD

ANALYSIS | 02/02/2016 04:36:13 GMT

This is a question that came in regarding a possible short entry in NZD/USD as I had discussed earlier.

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Hi,

Would it be too much of a chance to short NZD/USD now ?

Thanks,

Marco B - Switzerland

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Hi Marco,

Great question and the answer is: it depends.

But seriously, I think we all can get caught up in trying to be too perfect in our entries at times.

Risk can always be managed, so if you can define the risk and select your lot sizes accordingly, then it may make sense to build a short position here.

Let's review the trade parameters first:

Assuming the S&P's stall into projected resistance and resume the downtrend, pairs like NZD/USD will track lower too.

NZD/USD is already lagging the move higher in the S&P's. Thus all else being equal, one would assume that it will be weaker than the S&P's when the downtrend resumes.

Thus, as long as you are willing to give yourself a relatively wide stop and start building a short position (allowing for more upside if S&P's rally) it is a pretty robust case for being short NZD/USD in my opinion.

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