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It looks like trade tensions between the U.S. and China aren’t going away anytime soon, so I’m looking at this potential short Aussie play.

Short AUD/NZD Idea

This pair has formed lower highs and slightly lower lows, creating a falling wedge pattern visible on its 1-hour time frame. A bounce off support just took place so a test of the resistance may be due anytime soon.

At the same time, stochastic is heading north but approaching overbought levels to signal weakening bullish momentum. Turning back south could draw sellers back in and spur another move back to the bottom or even a break lower.

AUD/NZD 1-hour Forex Chart
AUD/NZD 1-hour Forex Chart

Even though both the Aussie and Kiwi could suffer blows as the trade spat escalates, the former seems to be at greater risk since a larger chunk of its exports go to China. And judging by the currencies reaction to the latest round of threats, AUD does tend to have a rougher time compared to NZD.

There are no major reports from both Australia and New Zealand this week, but RBA head Lowe has a testimony coming up so it will be interesting to see his take on these tariff announcements. Apart from that, China is due to print its CPI readings and more importantly, it’s trade balance data later on this week.

I haven’t set any actual sell orders yet since I plan on waiting for more confirmation right around the test of resistance. In particular, I’m looking out for any additional statements from the White House (or tweets from President Trump!) to see if they’ll keep pushing for protectionism.

What do you guys think? As always, I enjoy getting feedback on my trade ideas!

Cheers,

Happy

See also: Q4 2017 Trading Performance Review

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