On this week’s crosses watch, we’re going with the “anti-risk sentiment” special: pitting safe haven vs. safe haven and comdoll vs. comdoll. Check’em out, along with a look at the ever volatile GBP/NZD!
Since Australia and New Zealand are not only close trading partners, but also geographically close, they move in strong correlation with each other during environments dominated by global risk sentiment. So, trading AUD/NZD hedges out on many occasions a bit of the shock from geopolitical surprises like we’ve seen in the past week.
On the one hour chart above, we can see the pair has been in a steady uptrend all August, but volatility picked up big time in the last couple of sessions. Not only did we see a break the rising ‘lows’ but in one session, the pair has already come up to retest and stall at the broken trendline. With stochastic signaling overbought conditions, the pair could be a sell opportunity if the market moves lower, which is a big possibility with a busy week ahead for the Aussie dollar.
Next, we’re pitting the two top safe haven currencies, the Japanese yen and Swiss franc, to once again hedge a little bit of risk sentiment driven moves. And this week, it looks like the opportunity is in favor of CHF/JPY bears as the pair retests a very strong area of interest around the 108.40 handle. This level has been a major support area all through August, but broke through to the downside this past week and after all of the big volatility in the past week, found its way back to 108.40.
Given that we see this is a retest of a strong area of interest, a Fibonacci retracement level, and the stochastic shows short-term potentially overbought conditions, odds are in favor of bears for now. Look out for a move back to the downside before putting the plan together to play the downtrend.
Last but not least, let’s check out one of the most volatile currency pairs among the majors: GBP/NZD. It’s weekly Average True Range (ATR) is somewhere over 300 pips a week, so there’s almost always an opportunity to catch a lot of pips under the right conditions.
On the one hour chart above, we can see the pair has been on a steady grind higher all month but has recently settled into a range between 1.9100 – 1.9300. The pair is actually back retesting the bottom of that range, which also intersects with the rising “lows” pattern, and we have stochastics signaling short-term oversold conditions. So, the odds are currently in favor for the bulls who want to play the uptrend at a better price than last week, but this chart is also an opportunity for the bears as well. If we see a break below the rising “highs”, then this pair can quickly fall with the right catalyst and easily give back half of the bull’s August gains.