Australia’s downbeat GDP reading could serve as a breakdown catalyst for this descending triangle on AUD/NZD. Here are the levels I’m looking at.
AUD/NZD Trade Idea
This pair has been forming lower highs since mid-November, indicating that Aussie bears keep trying to push the price down. AUD/NZD is now testing the descending triangle support at the 1.0420 level once more and could be due for a break lower since the Australian economy just reported a surprise 0.5% contraction (well, not such as a surprise if you’ve read Forex Gump’s trading guide beforehand) instead of growing by 0.2% in Q3.
Just a few hours earlier, New Zealand held its Global Dairy Trade auction and reported a 3.5% gain in prices. This marks the fourth consecutive increase in dairy prices, possibly prompting another round of milk payout forecast upgrades from financial institutions.
I’m looking to short on a break of the triangle support and I’ll have my stop past the triangle resistance and the 1.0500 major psychological level. Stochastic is already heading south from the overbought zone to signal that sellers are ready to take control of AUD/NZD price action.
As for my profit target, I’ve zoomed out to the 4-hour chart to spot this long-term range with support at the 1.0300 mark. I’ll aim for this area as my initial target but I’ll be ready to set my sights lower and trail my stop if the pair shows signs of breaking below this area as well. Next stop is nearly parity if you check out the longer-term time frames!
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See also: Q3 2016 Trading Performance Review
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