We’ve got a potential reversal in the works on AUD/NZD as the pair retests a strong area of previous resistance. Will upcoming top tier data from Australia and New Zealand bring in the bears?
AUD/NZD Range Resistance?
On the weekly chart above, we can see AUD/NZD has made its way back up to 1.1000, a very strong area of resistance between 2017 and 2018. We’ve already seen one rejection of the bulls in mid-August, but another retest could be in the cards with the latest GDP data from New Zealand and employment data from Australia coming this week.
Expectations for the New Zealand GDP update are for a big decline of around 13.1%, which if inline or worse could prompt a quick sell off reaction in the Kiwi. And vice versa, a better-than-expected read could draw in the bulls and/or profit taking from the hit the Kiwi has taken the over the past several months of negative rate speculation.
As for the Australian jobs update, expectations are for a -40K net job loss in August vs. the 114K gain in July, which if inline or worse, could be a downer for the Aussie dollar.
So, the ideal scenario that I’m watching out for to play the technical setup (i.e., range resistance and bearish divergence) is weaker-than-expected Aussie jobs data and a better-than-expected read on New Zealand GDP. I may even make a short play if NZ GDP comes roughly inline with expectations as that number has likely be priced in for quite some time now and could spark a “sell the news” reaction.
If that scenario plays out and AUD/NZD takes a turn lower, I’ll look to short AUD/NZD for a longer-term swing play to the downside.
For now let’s wait and see and until then, as always, 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 simply follow what I do.