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I’m seeing a textbook trend pullback setup on the 4-hour time frame of AUD/NZD. Do fundamentals line up with a short trade?

AUD/NZD Trade Idea

This pair has formed lower highs and lower lows inside a descending channel on its 4-hour time frame. Price is currently testing the resistance that happens to line up with a former support area and the 61.8% Fibonacci retracement level.

Stochastic is already on the move down to show that selling pressure is picking up. This might be enough to take the pair back to the swing low around 1.0427 or the the bottom of the channel closer to the 1.0400 handle.

AUD/NZD 4-hour Forex Chart
AUD/NZD 4-hour Forex Chart

There are no major reports due from the Land Down Under or New Zealand for the rest of the week, so this pair might simply be in for either consolidation or continuation of the trend.

The RBA cut interest rates twice in a row while the RBNZ just had one rate cut this year so far, which might put the Aussie on more bearish footing. Then again, market watchers are expecting the RBNZ to have another easing move up its sleeve next month.

The following week has the New Zealand CPI report due, so this might provide more clues what the central bank’s next move could be. Meanwhile, Australia has its jobs report coming up then, along with top-tier Chinese economic data.

I’m tempted to just hop in at market with a short position, but I’m wary of another likely RBNZ cut. Maybe I should wait for an upside breakout instead?

For now, I’m gonna keep an eye on the 1.0550 minor psychological level just slightly past the channel top to see if a reversal from the trend is due. At the same time, I’ll also stay on the lookout for a move below the 1.0500 mark to gauge if bearish momentum is picking up.

What do you guys think?


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