NZD/USD Bulls Are Salivating

New Zealand is the latest to fall victim to the coronavirus. A woman in her 60s who traveled from Iran to Auckland via Bali tested positive for the virus on Friday. NZD/USD was down 1.1% Friday, gunning for its October 1 low near .6200. The lows of 2015 are .6193 as well. From a trading point of view, NZD/USD bulls will be looking to buy near this level, placing stops below the 2015 lows. Why? Because there is tremendous risk/reward potential. If one buys near .6230, and risks 50 pips, that trader may look for a target of .6430 (or more) – or the 38.2% retracement from the December 31 highs to Friday’s low. That’s a risk/reward of 1:4, which is risking 50 to make 200. Bulls may look to take advantage of the risk/reward near the lows.

Daily NZD/USD Daily NZD/USDSource: Tradingview, FOREX.com

On the shorter 240-minute timeframe, let’s say a trader wants to risk less. This trader has to be patient and wait for the market to “come to them,” near the .6200 level. The trader, for example, only wants to risk 20 pips. He or she may wait and buy at .6205 and place stops below the 2015 lows at .6185. Horizontal resistance appears to be at .6284. So, if this trader places a take-profit order at .6275 (or more), the risk/reward would be 1:3.5, that is, risking 20 to make 75. The RSI is diverging with price, but in this hyper volatile market and oscillators should not be used alone (or even at all). But again, bulls may look to take advantage of the risk/reward near the lows.

4-Hour NZD/USD 4-Hour NZD/USDSource: Tradingview, FOREX.com

Whether one is bullish or bearish, each trader has their own risk tolerances. That is something each trader must decide for himself or herself. Sometimes, when things look to be at their worst, they may actually turn out to be the best. As long as traders use proper risk management (NZD/USD bulls in this case), trades can have large upside potential, or minimal loss. In this case, bulls may be looking for support near the lows to try and make that happen.