Potential trade idea - buying AUD/NZD

Potential strategy: buy AUD/NZD at 1.0605 (price at the time of writing), with a potential stop at 1.0490 and a target 1.0740.

Technically AUD/NZD is a longer-term downtrend; however a bullish reversal has been seen at the trend low, suggesting we could see a short-term reprieve for the pair.

In terms of rate expectations, the market has priced in fairly aggressive action from both central banks, with fifteen basis points of hikes from the RBA and 122 from the RBNZ over the next twelve months.

The Australian economy is clearly in a better space of late, with retail sales growing 6.2% (year-on-year), the trade balance surplus increasing to a$1.4 billion and the economy putting on 47,000 jobs in January.

On the other side of the scale we have seen business conditions fall in February, as did consumer sentiment, while home loans fell for the first time in five months.

The pair seems oversold on both the daily and weekly chart, although this is clearly a function of the strong downtrend. With the MACD firmly below zero on the daily chart, I would expect rallies to be contained within the bearish trend, but for now I am looking for a tactical bounce in the pair.

Today’s RBA minutes will be interesting and there is a risk that the RBA will spend time talking about how it would like a weaker AUD. However, if that fails to materialise, then we could see upside.

AUD/NZD
IG Charts

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Find articles by analysts

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.