AUD/NZD is back to an area that’s held the bulls off in the past…Are the bears ready to take control once again? Let’s check the latest events & price action to find out!
AUD/NZD Range Reversal?
I’m checking out AUD/NZD this week because we’ve actually got a pretty heavy week for both currencies in terms of potential catalysts. We just got the latest Reserve Bank of Australia monetary policy statement to get the party rolling, but the real market mover could be the upcoming monetary policy statement from the Reserve Bank of New Zealand, which Forex Gump covered in his latest post.
You should check out the post for his latest analysis on what we may see, but the if you don’t have time to read, the things to look out for are if there are still concerns with the Kiwi’s current exchange rate levels and if there will be a change in the RBNZ’s mandate to include maximizing employment. If there is, it could result in lower interest rates, which could send Kiwi bears charging in.
But with the latest New Zealand employment data coming in strong, it’s a lower probability we’ll see that kind of discussion in this week’s meeting. And with focus fading away from the recent elections, I think the recent rally in Kiwi has a good chance to hold.
I wanna play this idea with AUD/NZD because it is bouncing lower from a major resistance area (marked on the daily chart above around the 1.1300 area), showing the bears are likely back in town. And because the potential reward is really attractive; when targeting the bottom of the major range, I getting a potentially high max reward-to-risk of around 4:1.
But with the RBNZ meeting and some top tier Chinese inflation data to potentially influence the Aussie dollar, I’m gonna see if I can get in a short position at a higher price, closer to the top of the longer-term range. And I’ll limit my risk by going with a little more than a one weekly ATR stop to give the trade room to breathe. Here’s what I’m gonna do:
Short half position AUD/NZD at 1.1200, max stop loss at 1.1400, max target at 1.0400
I’ll be risking only 0.5% of my account on this position and as usual, I’ll look to make adjustments at around 1.1000 if I’m triggered, which would likely to be adding to my position/roll down my stop to max out the trade if the momentum is still strong and the fundies support further moves lower.
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