Okay, it’s settled… I’m gonna wait for a pullback! I’ve wanted to catch this potential swing forex setup on AUD/NZD so I zoomed in to the 4-hour chart to spot a good entry.
You see, I’m long-term bullish on this forex pair mainly due to monetary policy differences between the RBA and the RBNZ. While the latter just cut interest rates earlier this month, the former has maintained a relatively optimistic outlook and doesn’t seem inclined to ease anytime soon.
It was pretty tempting to just jump in at market when I saw that inverse head and shoulders pattern on the weekly time frame, but I thought it’d be best for me to stay patient and wait for a short-term pullback instead. Jobs data from Australia came in weaker than expected in today’s Asian session anyway, so there might be room for this pair to retreat.
In addition, stochastic is still pointing down, which means that Aussie bears are on top of their game at the moment. I’m eyeing a potential correction to the 50% Fib near the 1.1000 major psychological mark, which lines up with a former resistance zone, for my entry area.
I’m planning on setting a wide stop below the swing low and a large target the same size as the reversal formation since this would be a swing trade, after all. Still, I’ll be ready to move my stop to entry or trail it higher once price tests the 1.1350-1.1400 long-term resistance. A break above that neckline could convince me to add to my long position, depending on whether the fundamentals still line up or not.
Here are the deets:
Long AUD/NZD at 1.1025, stop loss at 1.0625, profit targets at 1.1800 and 1.2000.
I’ll be risking 0.5% of my account on this setup so don’t forget to look at our risk disclosure if you’re thinking of joining me. What do you guys think?
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