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What to Watch: AUD/NZD
It’s mostly quiet in FX land, but we did see some strong directional bias in the Kiwi today, beating out the majors for the session without an apparent catalyst behind the move. This could be on expectations of no interest rate cuts from the RBNZ this week, but we of course can’t be sure at the moment.
But since the momentum is there, we’ll pair the Kiwi with the Aussie as we could see volatility coming soon from the upcoming Australian flash manufacturing and services PMI. We can also see in the one hour chart above that the currency pair is in a slow grind lower, with lower ‘highs’ signaling growing control by the bears, which could potentially create a support break around the area marked on the chart (around 1.0640)
So, it looks like the odds are in the bears’favor at the moment, and if we do see disappointing Aussie data later in the upcoming Asia session, a break below 1.0640 could draw in momentum selling. The next support target would be the previous swing low (around 1.0585), which is a little under the daily ATR range away, making it an achievable target within a session or two.
If you’re a bull on AUD/NZD and we do see some positive business sentiment data from Australia, then the break above the falling ‘highs’ pattern on the chart above is the scenario to watch out for.
If the bulls take control there (just under the 1.0700 handle) then consider a long swing position as the next resistance area (around 1.0725) is a poor risk-to-reward scenario go for if using the daily ATR as a stop guide.
If the market drifts lower ahead of the Asia session and the Australian data, then consider a long at the previous swing low, which offers a much better swing trade R: R if keeping a tight stop on the other side of the support and targeting the falling ‘highs’ pattern.