NZDUSD S1B – Analysis (19th Feb)

For educational purposes I am going to look at a S1B setup on the NZDUSD.  I say educational, because even if it was a nice setup, I wouldn’t be able to trade it because it is now less than 36 hours to tonight’s FOMC announcement.

Let’s assume for a minute that there was no FOMC announcement tonight:

  • NZDUSD in a S1B environment – according to the STAM dashboard
  • The weekly momentum is bullish.
  • It is not a strength (10-14 points)/weakness (0-5 points) combination.  USD is on 4 and NZD is on 8.  However it is possible to trade medium (6-9 points) against weak if the rest of the setup looks great.
  • Is the pair in a bullish trend on the D chart?  No it is not.  On the D chart it is in a sideways pattern.  See the chart below.Image
  • There was a retracement of 110 pips (more than the 80 required).  The retracement did make a lower low – not a clear break of the trend, but not an ideal sign.
  • Following the retracement, there was some bullish price action on the 4H chart – a bullish engulfing candle.  And as a bonus this came directly out of a demand zone (my own one and OTA’s zones overlapped).  On the 15M and 1H timeframes, price put in clear double bottoms within the zone.
  • A further bonus is that, on the primary 4H timeframe, momentum is oversold and there has just been a bullish crossover.Image

Thus on the whole, there is no trade because:

  1. There isn’t a clear trend on the D chart
  2. That aside, the setup would be good enough to overcome the strength/weakness requirement in this instance.

 

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