AUD/NZD Trade idea

[Guest DanC]

Hi all,

 

Please see below for an interesting take on the AUD/NZD, provided by our Market Analyst, Chris Weston.

 

Trade idea: Sell AUD/NZD on a daily close (8am AEST tomorrow) below NZD1.0886, placing a stop loss at NZD1.1010.

AUD/NZD price at the time of writing: NZD1.0873

 

I am watching for a daily close below the 12 May high (NZD1.0886 – circled) and 38.2% retracement of the April to July rally (NZD1.0897) to look at short positions. This would effectively mean I am willing to accept a worse price, but I am waiting for confirmation from the market that the buyers are not prepared to step in and support key levels.

 

The trend is progressively becoming more bearish and as you can see from the daily chart there is a confluence of support levels that I am keen to see the pair close below. In terms of identifying a stop loss, I feel that a stop loss above the 7 October high and rising trend (drawn from the July pivot low) at NZD1.1010 makes sense, as this would suggest a stronger move higher and my initial view incorrect.

 

Looking at the various oscillators, the fact the nine day RSI is at low levels is a reflection of the recent sell-off and is not yet grossly oversold. Stochastic momentum is clearly at low levels, but it feels as though rallies should be contained within a progressively bearish trend.

 

The 50% retracement of the April to July rally is a clear initial target at NZD1.0733, although I would look to see how the pair is reacting around this level, as it may even pay to add to potential short position if the momentum continues to build.

This is a technical idea based on momentum and to a degree trend. I have placed a five (blue) and ten (red) moving average on the chart to highlight the trend.

 

 

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[Guest DanC]

Also, Chris' insight on a few other pairs:

 

Despite the positivity to the CAD, AUD/CAD interestingly printed a bullish key day reversal yesterday. As long as yesterday’s low of C$0.9248 can hold, I wouldn’t be surprised to see a move into C$0.9500. Perhaps a better way to express a short-term positive view on the AUD is against the EUR, although my conviction to be short EUR/AUD would be significantly heightened on a close through the August and September double bottom at A$1.5600. I would then even look at adding to short positions on a break of the April uptrend, which currently sits around A$1.5400.

 

The full article can be found here: Asian markets in a reflective mood

[FiringSquad13]

 Thanks for posting these trading ideas.  I have been watching the AUD/NZD for a while.  I have been stuggling to identify an entry point due to the mixed indicators.  The RSI and STOCH does suggest oversold but of course a close below the support could suggest a further move down.

 

Attention seems to have moved away from some of the Asian and other markets with focus on the USD and GBP, dominated by a potential interest rate rise.

 

I'll be watching this one.  Anyone else looking at this pair to trade?

[jbtrader]

Thanks for the Trading Idea.

Great to hear specific trades from IG research.

 

Having fallen from mid 1.13s I will give this a miss for now.

I prefer trading short the JPY and EUR atm.

I have gone long GBPJPY for now and should have added AUD,CAD and NZD against the JPY as well.

Might wait for a pullback now before enering these trades as well.

[Guest ChrisW]

I like the short term trend developing and could run up to potential supply around the Y186 area. RSIs are smack bang in the mid range (51), so be good to see a continued push higher, in turn pushing the momentum focused players into the trade.

 

The hourly looks quite compelling too.

 

I looked at AUDUSD ideas today as well as I just think in this enviroment of falling volatility we are seeing funds looking to pick up higher yield assets (carry structures), which will include AUD, NZD and emerging market FX too. A closing break above 18 Sept high of 0.7280 (right here now) would open up a more pronounced move into the 74 or 75 handle IMO.

 

There is a correction underway in the USD and while I am a longer-term USD bull, it seems the damage done to the US economy (from USD strength) is really hitting home to the Fed. John William (SF fed president) floated the idea cutting the rate banks are paid to hold funds on the Fed balance sheet to negative. While that is a long way off, negative rates would cause banks to pull capital held on the Fed's balance sheet earning 20 basis points (or 0.2%) and much of this would flow offshore causing USD outflows. One to watch but risk of further USD weakness is real to me.

[Guest Zero]

Hmm, the idea of negative US rates seems to be gaining momentum....  I think Macquaire Bank was the first to put the idea out there too.