Forex Trade Idea: AUD/NZD Short

Spotted a simple channel setup on AUD/NZD that makes sense with the market being in the doldrums of summer. After bouncing off of the top, will the pair make its way to the bottom of the channel?

AUD/NZD 1-Hour Forex Chart

AUD/NZD 1-Hour Forex Chart

On the one hour chart above of AUD/NZD, we can see the channel with a slight bias to the downside as we spot lower “highs” and lower “lows.” The pair just bounced off of the top of the channel once again, and now it’s holding at a level of previous strong interest 1.1150.  Will this level break?

Of course, I don’t know, but with the directional bias to the downside at the moment, I think the odds are in favor of the bears for now. Also, we just got a big positive read from the Global Dairy Trade numbers, which may help support the Kiwi in the short-term since dairy is one of New Zealand’s biggest exports.

I think this area between the current levels, all the way up to the previous resistance area is a legit area to draw in sellers, which is why I’m scaling into a short position on this pair. My max stop is above that end of June high just above 1.1400, and my max profit target is the around the bottom of the channel and near June consolidation. Here’s what I’m going to do:

Short quarter position AUD/NZD at 1.1150, max stop at 1.1450, max profit target at 1.0800

Short quarter position AUD/NZD at 1.1300, max stop at 1.1450, max profit target at 1.0800

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t follow what I do. Risk Disclosure.

I’m only risking 0.50% of my account on this one, and with this trade structure, I have a potential reward-to-risk ratio of about 2.24:1 if both positions are triggered.  But with the choppiness of the market recently, I’m likely to not get greedy with profits and take’em quickly. Of course, anything can happen in the forex markets, so if the story changes I’ll be sure to reassess and adjust quickly if necessary…stay tuned!

  • Ken

    This looks like a complex correction of a bigger move rather than a downtrend. Still I think a short at 1.1300 with a stop at 1.1450 ain’t bad at all. The stop and the target are clear, but the downward bias is not strong. the last low is higher than the previous one. How about waiting for that and putting the entire position on there? If price doesn’t pull back and get you in there….you really haven’t lost out. The opportunity at 1.1150 is not that attractive at just 1:1.
    Just my 2 pips buddy, good luck!

    • Cyclopip

      Thanks for your thoughts Ken and sorry for the late reply! They pair worked out well as you saw, but to comment on your question, I like to spread out my entries nowadays between market levels and pullbacks because my stats from previous years show that I’ve missed on too many profitable trades because of waiting. Scaling in allows me to get in but the trade off is I tend to win more often but with smaller positions. And I’m okay with that because as my account gets bigger, my position sizes will get bigger as well. I’m in no rush because I know that trading is a marathon, not a sprint…. Hope that helps!