Trade idea: AUD/NZD

Sell AUD/NZD on a daily close below NZ$1.0886, placing a stop loss at NZ$1.1010. AUD/NZD price at the time of writing: NZ$1.0896.

NZD
Source: Bloomberg

I am watching for a daily close below the 12 May high (NZ$1.0886 – circled) and 38.2% retracement of the April to July rally (NZ$1.0897) to look at short positions. This would effectively mean being 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 NZ$1.1010 makes sense, as this would suggest a stronger move higher, making my initial view incorrect.

Looking at the various oscillators, the fact that 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 NZ$1.0733, although I would look to see how the pair is reacting around this level as it may even pay to add a 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.

AUD NZD
Click to enlarge

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

This information has been prepared by IG, a trading name of IG Markets Limited and IG Markets South Africa 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. International accounts are offered by IG Markets Limited in the UK (FCA Number 195355), a juristic representative of IG Markets South Africa Limited (FSP No 41393). South African residents are required to obtain the necessary tax clearance certificates in line with their foreign investment allowance and may not use credit or debit cards to fund their international account.