Taking another shot on AUD/NZD, playing my short bias but this time at a better price. Bears to return at a major resistance area?
Sellers At Strong Area Of Interest On AUD/NZD?
As I mentioned in my trade review of my last AUD/NZD short attempt, I’m still bearish on the pair for fundamental reasons that I talked about in my last trade idea, but also on recent comments from both the Australia and New Zealand’s central banks.
For those who want to read a recap of those recent comments from the RBA and RBNZ, you can read a full recap by my friend, Forex Gump. But to keep it short for this post, it looks like that both are leaning more towards rate hikes than cuts, but it’s also highly unlikely that those monetary policy changes any time soon, probably not until the end of 2019 or beyond.
With monetary policy likely to stay neutral for the foreseeable future, I think back to the recent weak Aussie data to maintain my bearish AUD/NZD bias, and why I’m looking at this technical setup to hop back in.
On the daily chart above, we can see that 1.0900 has been an area of major interest, first as support in 2017, and now strong resistance in the last couple of months. We can also see a bearish candle pattern has emerged a couple of days ago in the form of a quasi-evening star pattern, and when combined with stochastic indicating potentially overbought conditions, this is probably a signal a lot of technical traders may act on.
With the fundies and price action lined up, I’m going to take another shot at AUD/NZD for a position play, or one that may likely take a month or two to develop as we’re in the Summer months and the economic calendar isn’t too heavy in the month of July for both Australia and New Zealand.
I’m setting my orders here just above market for a slightly better price, and my stop will be one weekly ATR to give the trade room to breathe. My target will be the last major support area that drew in buyers through all of 2016 and 2017. Here’s what I’m doing:
Short half position AUD/NZD at 1.0900, max stop at 1.1050, max target at 1.0500
I’ll be risking only 0.5% of my account on this position and with this setup, I have a roughly 2.67:1 potential return-on-risk. Both Australia and New Zealand have important inflation and employment data coming up later in the month, so dependent on those events, I may adjust early to reduce risk or maximize gains if the situation makes sense.
Stay tuned 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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