Activity could be picking up in the Australian dollar very soon with the latest Australian employment update right around the corner.
Will volatility pick up for the Aussie during this event and will it bring another buying opportunity at a better price in AUD/NZD’s uptrend?
AUD/NZD Uptrend Play
Looking to get into a swing position in AUD/NZD to play a couple of fundamental themes. First is the recent bearishness on the Kiwi as the RBNZ just doubled their asset purchasing program, as well as kept open the possibility of negative interest rates in New Zealand. Since this is a pretty fresh catalyst, pressure could remain on the Kiwi in the short to medium term.
Second, the Aussie has been getting love from FX traders, riding higher on improving global risk sentiment fueled by the expectations that the economy will improve as lockdown restrictions are eased. This is especially true with Australia that handled the coronavirus well and looks to end restrictions sooner than other major countries.
We’ve also seen some positive economic updates from Australia (Australian retail sales rose 8.5% m/m vs. 8.2% forecast, AU consumer sentiment makes impressive recovery in May), something we haven’t really seen yet in other major economies.
So, I’m likely the Aussie over the Kiwi, but we do have a major catalysts ahead in the form of the latest Australian jobs data coming very soon. The expectations are for pretty terrible numbers due to the coronavirus lockdown of course, which could bring AUD/NZD lower on the event.
If so and we don’t get a much, much bigger surprise than the 4 million jobs lost, then it makes sense to jump in the uptrend at a better price.
For now, I’m going to throw up a nibbler position at the rising ‘lows’ pattern marked on the four hour chart above, which lines up with a strong area of interest 1.0600 – 1.0650 that served as both resistance and support the past few weeks.
I’ll use the weekly ATR of around 150 pips as my stop guide, and my target for now will be twice my stop to start. Here’s what I’m doing:
Long half position AUD/NZD at 1.0700, max stop at 1.0550 with 0.50% risk, max target at 1.1000
I’m only risking 0.50% of my account on this trade, and I’ve got a potential return-on-risk of around 2:1. I will look to add to this position if the price moves my way and if there is bullish momentum over the next week or so.
If my orders aren’t triggered by the end of the week, then I’ll look to close them down before the close on Friday.
What do you guys think? Are you watching AUD/NZD for a potential long position as well? Let me know in the comments section below!
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