This week, I’m checking out AUD/NZD for a potential pick up in volatility with top tier Australian and New Zealand data ahead.
AUD/NZD Consolidation Break?
On the four hour chart above of AUD/NZD, we can see the pair taking a breather after a strong bounce higher in a longer-term downtrend. Since the start of December, AUD/NZD made a 200 pip run higher, now testing the major area of interest that held as support at the end of October (around the 1.0600 – 1.0650 area), and then as resistance at the beginning of November.
So, it’s no surprise that the pair’s upside momentum has slowed as technical traders are likely trying to figure out / re-position in this area. It’s also highly possible too that last week’s lack of major catalysts for the global markets was a contributor to AUD/NZD’s quiet week.
But up ahead, we’ve got potential catalysts from both Australia and New Zealand, the latest employment data for the former, and the quarterly read on GDP for the latter. Expectations are for Australian employment to have added jobs at a slower rate while maintaining the unemployment rate at 7.0%, while New Zealand GDP is expected to see a growth rate of 15.1% in Q3 2020.
If we see the numbers come in as expected, we don’t expect to jump much this week (barring any surprise updates on the Brexit, U.S. stimulus, or coronavirus fronts). But if Australia disappoints and New Zealand GDP beats big time, that could traders back into the longer-term trend lower.
I’ll be looking out for that scenario to play out before considering a short position, which I’ll put together if the consolidation pattern above breaks to the downside.
If we see the opposite scenario play out (i.e., strong Australian jobs data vs. weak New Zealand GDP data), that’s not necessarily enough for me to get bullish on AUD/NZD just yet. I’ll have to see how far off the reads are and the market’s reaction before leaning that way.
So, that’s it for now and I’ve got my alerts set for when the market breaks out of consolidation. What do you all think? Are you watching AUD/NZD for a potential trade? If so, what’s your directional bias and entry strategy? Let me know in the comments section below!
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