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This is another short-side Aussie setup; and two targets remain from our prior setup investigated earlier in November. This time, however, we’re going to look to avoid the U.S. Dollar altogether and instead use the New Zealand Dollar.
This setup looks to play a reversal off of longer-term resistance in the cross-pair of AUD/NZD. The pair has spent much of the past three years displaying some element of mean reversion; and while the support side has been less horizontal in nature from what most traders would prefer when trading a range, the resistance side of the coin has been fairly consistent around the 1.1300 level. The most recent test around this area took place last month.
AUD/NZD Daily: Resistance Test ~1.1300
Chart prepared by James Stanley
Since then, price action has continued to exhibit tendencies of a turn-lower. On the four-hour chart below, we can see the further development of lower-lows and highs until, eventually, the 1.1000 level was tested. Bears have yet to be able to show a sustained break below 1.1000, and this opens the door for a re-test.
Chart prepared by James Stanley
Stops on the position can be investigated above the November swing-high at 1.1171; with an initial target set to 1.0915 at which point the stop can be adjusted to break-even. After that point, 1.0825 becomes interesting for secondary targets, with 1.0750 set as a third point profit objective.
Chart prepared by James Stanley
--- Written by James Stanley, Strategist for DailyFX.com
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