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AUD/USD, NZD/USD Continue to Show Divergence

AUD/USD, NZD/USD Continue to Show Divergence

2017-09-13 13:39:00
James Stanley, Strategist
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AUD/NZD has been on a rather brisk run of recent, and the pair is currently seeing some element of support at a trend-line that started around two months ago. And while this can open the door to topside setups in the cross-pair, this can also be utilized to take a hedged stance around the U.S. Dollar, looking to sell New Zealand Dollars and buy Australian Dollars against USD. The goal of such a strategy is optimized risk-reward ratios, so that even a 50/50 can lead to a profitable set of trades.

AUD/NZD Four-Hour: Bullish Trend-Line Inflection Holds the Lows

AUD/USD, NZD/USD Continue to Show Divergence

Chart prepared by James Stanley

Long AUD/USD for USD-Weakness Continuation

AUD/USD continues to flirt with the psychologically important .8000-level, and earlier this week brought upon a support inflection that highlights how markets may be getting more comfortable with .8000+ AUD/USD spot rates. Nonetheless, I want to give a little bit of room to this position so that another re-test around .8000 doesn’t wash me out. Just below current support is a confluent zone that runs from .7929-.7946, and this could be an ideal washout level as prices below this zone indicate that the bullish AUD/USD position is not ready for prime time.

A stop at .7915 gives some distance below this zone while taking on ~100 pips of risk, and this can open the door to a break-even stop inside of the prior high at .8100, with an initial profit target at .8160. Additional targets can be set to .8200 and .8250.

AUD/USD Hourly

AUD/USD, NZD/USD Continue to Show Divergence

Chart prepared by James Stanley

Short NZD/USD for USD-Strength Scenarios

While the U.S. Dollar has continued to show weakness, the New Zealand Dollar has been even weaker since late-July. The previous high-flying trend in NZD/USD continues to hit the skids, and we’re currently seeing resistance at an interesting zone in the pair. The price of .7335 is the 38.2% retracement of the pair’s 2009-2011 major move, and this level has shown numerous instance of support/resistance in the recent past.

This can open the door for a similar 100-pip stop as the above AUD/USD position at .7366, along with a break-even stop at .7200. The first target at .7150 can allow for a deeper break-even stop move, with additional profit targets set to .7100 and then the major psychological level of .7000.

NZD/USD Daily

AUD/USD, NZD/USD Continue to Show Divergence

Chart prepared by James Stanley

--- Written by James Stanley, Strategist for DailyFX.com

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