I’m seeing a long-term support bounce on AUD/NZD’s daily chart that might be enough to keep Aussie bulls charging. Take a look!
The pair already rallied off support around the 1.0450 minor psychological level, which coincides with the bottom of the descending channel on the daily time frame. Price has formed a small flag pattern, possibly indicating a continuation of the move.
Zooming in to the pair’s 1-hour chart, I noticed that this consolidation pattern looked more like a descending triangle so I set a long order just above the 1.0700 resistance. And when Australia’s quarterly CPI came in line with expectations and weighed on RBA rate cut hopes, price spiked up to hit my entry order!
Now I can’t help but worry that this might be a fakeout since AUD/NZD is retreating to the triangle support once more. Still, I’ve got a pretty wide stop at the 1.0425 area below the daily channel support and larger than the pair’s average WATR of 200 pips.
Since this is a countertrend trade (at least from the daily trend), I’m playing it carefully with an initial PT near the 1.1000 handle and mid-channel area of interest. I can adjust my target to the top of the channel if price shows stronger bullish momentum or exit this trade early if the pair makes a strong downside break from the triangle support around 1.0625.
Both the RBA and the RBNZ have dovish monetary policy biases at the moment, but I’m inclined to think that the latter might be more ready to cut rates. After all, the RBA lowered interest rates only when the quarterly CPI came in far below expectations earlier this year while the RBNZ looks ready to put housing market restrictions in place to prep for additional easing.
Here’s my plan:
Long AUD/NZD at 1.0725, stop loss at 1.0475, initial PT at 1.0975. I risked 0.5% of my account on this setup for a 1:1 return-on-risk.
As always, don’t risk more than 1% of your account on a single trade and make sure you read our risk disclosure if you’re thinking of taking the same setups.
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