AUD/NZD bulls have been on fire this month but it looks like the ride higher may be running out of steam.
Is this another opportunity to play the uptrend at a better price?
AUD/NZD Uptrend Pullback
I’ve been looking for a way to play my fundamentally negative bias on the New Zealand dollar (mainly on the potential for the RBNZ to implement negative interest rates in New Zealand). I’d like to do that against the Aussie whose recent economic updates have shown a rebound (AU economic conditions continue to recover, Consumer confidence continues to rebound), and as the RBA has toned down any speculation of further intervention to devalue the Aussie dollar.
With no major catalysts scheduled for either currency for the rest of August, I think the odds of the uptrend in AUD/NZD to continue remain better than ever. And with today’s pullback, it looks like I get to take a shot at the uptrend at a better price.
The pullbacks being very shallow this month, so I’m not going to wait for a big pullback before building my long position. Instead, I’ll be scaling into a long position, starting with a nibbler at current market prices. I’ll be scaling in down to the rising lows pattern / minor psychological level marked on the chart above, and my stop will be roughly one daily ATR lower from that point.
My max target will be just under the Summer 2019 swing high that could draw in sellers if retested. Here’s what I’m doing:
Long half position AUD/NZD at market (1.0971), max stop at 1.0840 with 0.50% risk, max target at 1.1145
Long half position AUD/NZD at 1.0910, max stop at 1.0840 with 0.50% risk, max target at 1.1145
I’ll be risking only 1.00% of my account if both positions are triggered, with a 2.41:1 potential R:R. I may add to this position depending on what we see from this week’s data and news events. If the data and market sentiment shifts and continues to favor a weaker Aussie as it did today, then I may close the down the position/orders right away.
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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