Forex Watchlist: AUD/NZD Reversal for RBA Decision?

I’ve got this nagging feeling that the RBA decision might turn out more dovish than expected so I’m looking at this potential AUD/NZD short trade. What do you guys think?

AUD/NZD Trade Setup

Similar to that AUD/USD chart I shared with y’all in my Comdoll Trading Kit for the week, I’m seeing a head and shoulders pattern forming on this pair’s 1-hour chart. Price has yet to complete the right shoulder so I’m not too sure about hopping in yet, unless the RBA has some downbeat remarks in their upcoming statement.

AUD/NZD 1-hour Forex Chart

AUD/NZD 1-hour Forex Chart

As Forex Gump mentioned in his article on 3 Things to Remember for the RBA Statement, the economic picture isn’t as rosy for Australia since business sentiment and consumer spending have been on the decline. To top it off, mining and non-mining investment have been slowing as well.

While the earlier RBA minutes triggered a rally for the Aussie because most market participants thought it wasn’t as dovish as it should’ve been, there’s a chance that the new RBA head would set the record straight and admit that further rate cuts could be warranted. Don’t forget that Governor Philip Lowe has jawboned the currency in a few instances also!

As for the Kiwi, I’m thinking that expectations for another RBNZ interest rate cut have already been priced in for the past few weeks so it might not have much room to fall. Besides, New Zealand has another GDT auction coming up and another gain in dairy prices could allow the currency to rebound.

I haven’t set any orders yet since I want to wait for the actual RBA decision before taking any positions. If the pair does sell off and I’m able to jump in quickly, I’ll be aiming for a short until the neckline support or an additional 100 pips down, which is the same height as the chart pattern.

Don’t forget to check out our risk disclosure when taking any of these setups. Got any comdoll trade ideas you’d like to share? Post ’em right here!

Cheers,

Happy

See also: Q2 2016 Trading Performance Review