Forex markets continue to be trendy, with little place for consolidations. So let’s break down three currency pairs that offer solid profit potential.
NZD/USD significantly oversold
NZD/USD tumbled throughout the whole year along with other USD pairs as the USD’s strength caused the weakening of other fiat currencies. This currency pair has fallen by about 17% so far in 2022, with many traders eyeing it as oversold.
Also read: $3,500 per Bitcoin as the worst case scenario? Not so fast
In the next few days, NZD/USD is expected to fall more to the marked support 0.546 and probably even to 0.54. However, a short squeeze could come after this level is reached, which offers an opportunity for a long position. Something similar could happen after EUR/USD had hit 0.95, then bounced to parity (500 pips move) in just one week.
That is why traders should stay focused, wait for NZD/USD to fall a little below this support, and wait for another divergence that will confirm this bullish move. The breakout of the trend line will be the final confirmation of an upward move to at least somewhere between 0.58 and 0.60. There is no reason to be bearish in the long term, only in the short term.
NZD/USD daily chart, source: tradingview.com
EUR/JPY triangle formation
EUR/JPY is following in the footsteps of USD/JPY. This currency pair has grown by about 10% so far this year with no signs of stopping. EUR/JPY filled an important gap back in September and sank lower, but it created a higher low after every price drop.
There is a crucial resistance at 149.78, where EUR/JPY is very likely headed in the next few weeks. There might be small pullbacks downward by 100-200 pips, but there is an obvious profit target of 500 or more pips on this trade. Entering the long position at another higher low which could be created soon, will offer the biggest probability of a winning trade.
EUR/JPY daily chart, source: tradingview.com
GBP/NZD was absurdly bullish
GBP/NZD fell along with other currencies with the British Pound and stopped at a support 1.813. But, then, this currency pair made a large 2,000 pip move in just three weeks. As GBP/NZD regained its losses, it’s up by about 1.7% in 2022.
Read more: Inflation breakdown – Not as bad as it seems
This is the only currency pair in this market outlook that is not up or down significantly. Many traders are probably looking for short positions after such a big move, and they might be right. GBP/NZD stopped at a trend line while also filling the gap marked in the chart.
Divergence also confirms this might be a good bearish setup. So, in the next few days, GBP/NZD could fall easily by a few hundred pips as it failed to break a psychological level 2.0000. This currency pair is known for a long-term consolidation anyway. As you can see, there is no long-term trend. However, if it fails to bounce down, doors are open to hundreds of pips to the upside.
GBP/NZD weekly chart, source: tradingview.com
Bottom line
Do not forget to plan out the trade according to your own risk management and use stoploss to avoid unnecessary risk. Moreover, be aware that this market outlook is mainly technical, so fundamentals can change its course.
EURJPY looks so bullish that I think it will catch up with the moves of USDJPY in the last few weeks.