After a sideways Summer, AUD/NZD is finally back on the move to the downside in the past couple of weeks. Is this a new trend lower in the making?
Watchlist: Downtrend Momentum in AUD/NZD?
AUD/NZD bears had a pretty nice run in the past few weeks as the market finally broke down from the tight 1.0850 – 1.1000ish range we saw throughout the Summer. Both currencies have benefited from recent global risk-on sentiment (mainly as U.S.-China trade war fears lessen), but the Kiwi seems to have an edge over the Aussie, likely on bets that Australia’s weak inflation conditions and outlook will keep the Reserve Bank of Australia from raising rates any time soon.
I’ve been biased for a while in favor of the Kiwi over the Aussie, and with risk sentiment leaning away from inversion mode and Aussie inflation still weak, I think it’s a good time to revisit a short position on the pair.
Price action has confirmed this bias but according to my main man Big Pippin, AUD/NZD is testing the bottom of a rising channel on the Daily time frame, making it possible that technical buyers could take control for the time being.
Because of a potential major support area forming, I am putting this pair on my watchlist rather than entering in orders. I’ll be looking for a couple things to go live with orders: 1. if the pair does tick higher to that potential resistance area on the four hour chart above (Fibonacci retracement area and broken minor support level) and reverses lower….or 2. a break below the recent swing lows, which was also major support back in April and May of this year.
Looking forward, global risk sentiment and technical trading may drive price action for the rest of the month now that we’re past the latest central bank meetings for both countries, but we could see another spike in volatility near the end of the month with top tier economic events from New Zealand, including the quarterly retail sales report and the RBNZ Financial Stability report. Also, I’m keeping an eye on U.S.-China trade war developments as that’s likely to have a big influence on both currencies in the short term.
Stay tuned for updates and a potential fresh trade plan, and as always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.
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