Bearish Targets ... Even Deeper Downside? | $NZD $CAD #RBNZ #BOC

FX:NZDCAD   New Zealand Dollar/Canadian Dollar

On a pure fundamental basis, a rate-based directional bias should favor a decline in the NZDCAD pair.

First, $NZD was recently affected by a decline in its dairy futures pricing, bringing the currency to a double-top formation near the 0.87525 level, and capping any new advance on the back on these futures price concerns.

Also, RBNZ stated:

"We saw nothing today to change our view that this tightening cycle has a long way to run before it’s all over and done", suggesting a low-likelihood of any added hike in its rate, especially following its 25% cash rate hike on June 11, 2014.

On the Loonie side, #BOC remains in a wait-and-see stance. Its initial consideration was to favor a decline in its rate. However, it also expressed concerns about any rate hike based on its export impact . In fact, consensus so far sees a "positive manufacturing trends and an improving U.S. economy" as a basis for an ulterior rate hike, but none have expressed a likelihood for this rate hike to occur in July 2014 - Rather, an increasing number of economist are suggesting that November would represent the earliest such hike, if at all.


On a pure pattern play, this category of trader might perceive the morphing of either Bullish Bat , whose Point-D would complete the pattern at 0.92020, although a more bearishly expectant trader might see a crab completing at a lower 0.89802 level.


The model has produced a bearish market reversal confirmation signal, setting two bearish targets as follows:

1 - TG-1 = 0.92446 - 07 JUL 2014


2 - TG-2 = 0.91884 - 07 JUL 2014

These targets are colored to suggest that TG-1 (yellow) represents a moderate-probability target, whereas TG-2 (red) represents a lower-probability target. However, further downside is also probable, based on the recency of the reversal signal and the potential downside revealed by daily and weekly timeframes.


Bearish outlook is based on the complicity of fundamental, pattern and predictive model data. An interim reaction to the upside remains a possibility as usual, but the technical data favors a downturn so far.


David Alcindor
Predictive & Forecasting Analysis

Twitter: @4xForecasting


hi david .where you put the stop?
+1 Reply
4xForecaster ProSignals
@shlomi0138 - As I have indicated before, it all depends on your timeframe of reference (i.e.: scalping M1, M5, M15? Or swing trading at M15, M30?), your asset and risk exposure tolerance (i.e.: Are you trading a 1K, 5K or 100K account, and what is the percentage risked?), and the type of trading you seek to do (i.e.: Do you define yourself as a pattern, fundamental, or discretionary traders?).

Also indicated before is the recommendation that the trader should already know their SL before even knowing their targets. This is based mainly on the fact that if the trader understands his own risk tolerance and has defined it in terms of percentage risked, then a SL value should come before any decision to take a position.

The importance of understanding risk can be simplified by another question:

- How many times are you willing to lose a trade before wiping out your entire asset?

If your risk is 20% of your asset, this means that you would be willing to be wrong 5 times in a row before total consumption of your account. At 2%, the risk is diminished by a factor of 10, or 50 times. Studies have demonstrated that best outcomes are based on a 3% risk tolerance.

Now, let's assume that you are minimally funded at a retail-type of account. Most retail traders hold micro-accounts with risk tolerance typically imposed by timeframes between M15 and H4. The higher the timeframe, the larger the risk exposure based on the scale of price action. Assuming that you have $1,000 in your account. Then, a 3% of that account should invite you to no more than a $30.00 risk exposure for that account.

The targets I have been offering imply that the trader is experienced and bases his decision on a personalized sets of trading skills. If the trader is not willing to trade on this premise, then the targets I offer would expose that trader to two sets of unforeseen risks, which is that of lacking a plan and trading regimen, and that of added exposure to a directional bias that may be contrary to his level of risk tolerance.

For instance, when I define a bearish target at the H4 level, there remains quite a lot of room for the M15 timeframe to gain pips multiple times. So, again, the trader has to have his own trading plan - As it is often said:

"Plan your trade, then trade your plan"

Assuming a trader willing to stick to the M15 timeframe, using candles and an momentum indicator, then I would imagine such trader's action as following: Looking at the chart in a M15 level, he would look at all prior highs and expect price to attempt to reach that level (here, that recent high is 0.93653) as his SL. He would then look at an indicator that would signal a reversal at that level and use that as a discretionary entry point.

I understand this is a long reply to your simple question, but the fact is that there are too many variables within each trader to make everyone's trades comparable to the next trader. The differences I have defined above are wild variables that define each market participant.

At this point, I assume that the trader has the experience and understanding of his own trading plan to stick to that plan. The directional biases I offer should be taken as relative values compared to that trader's risk tolerance. So, a M15 trader should ignore my Weekly forecast, except perhaps consider the "prevailing winds" that it may indicate.

Feel free to define the type of trading (timeframe, pattern vs. other) in this and other inquiry, as it may help me refine the reply and avoid boring you to death with this type of long-winded comment (still on a road trip waiting for the family to wake up, so I really don't mind the time I might take to answer, while sipping on coffee).


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