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AUD/NZD Snaps Back from Slope Support Ahead of Retail Sales

AUD/NZD Snaps Back from Slope Support Ahead of Retail Sales

Michael Boutros,

Talking Points

  • AUD/NZD defends technical support ahead of New Zealand Retail Sales
  • Updated targets & invalidation levels

AUDNZD 120min

Chart Created Using TradingView

Technical Outlook: Last night’s RBNZ rate decision sell-off saw a strong defense of the lower median-line parallel of a formation we’ve been tracking off the July lows. SB Trade Desk subscribers have been long from sub-1.05 and while our broader outlook remains constructive, the immediate advance is vulnerable while below the 2016 open / 50-line at 1.0663/70. Heading into tonight’s retail sales print, look for interim support at 1.0554 backed closely by the monthly open at 01.0526. Broader bullish invalidation stands at 1.0488.

A breach higher targets subsequent topside objectives at a long-dated trendline / 100-day moving average around ~1.0725/38, the July high at 1.0771 & a key resistance confluence at 1.0788/93. From a trading standpoint, I would be looking to fade weakness while within this formation with a breach above the median-line targeting the upper parallel. For the complete setup and to continue tracking this trade& more throughout the week- Subscribe to SB Trade Deskand take advantage of the DailyFX New Subscriber Discount.

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  • Some interesting observations on SSI- traders are net short AUDUSD- the ratio stands at -1.75(36% of traders are long)-bullishreading
  • Short positions are 1.6% lower than yesterday and 20.9% above levels seen last week.
  • Open interest is 0.8% higher than yesterday and 18.9% above its monthly average
  • The last time SSI was at this extreme was in March- which ended up being the high
  • A summary of the DailyFX Speculative Sentiment Index (SSI) shows traders arealso net short NZDUSD- the ratio stands at -2.04(33% of traders are long)- also a bullishreading
  • Yesterday the ratio was -2.20, Open interest is 1.1% lower than yesterday and 14.8% above its monthly average.
  • Retail sentiment is approaching the most extreme read of 2016 – last time we were at these levels was on July 8th (July 12th was the high in price)

Summation

  • Both Aussie & Kiwi are approaching extremes in sentiment- the difference is, NZDUSD has marked this occasion with a stretch into fresh yearly highs while the AUDUSD has not. One of them is lying, and from the looks of AUD/NZD, the focus is more so on Aussie strength.
  • Also keep in mind that the SSI reading in NDUSD has largely held recent lows in sentiment (still above last month’s low) while AUDUSD sentiment has broken down to levels not seen since March- which was about mid-way through the massive early 2016 rally. Again tilts the bias in favor of the Australian dollar

Help fine-tune you entries, click here to learn more about the DailyFX Grid Sight Index (GSI)

Relevant Data Releases This Week

Other Setups in Play:

Looking for more trade ideas? Review DailyFX’s Top Trading Opportunity of 2016

---Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michaelon Twitter @MBForex contact him at mboutros@dailyfx.com or Click Here to be added to his email distribution list

Join Michael for Live Scalping Webinars on Mondays on DailyFX and Tuesday, Wednesday & Thursday’s on SB Trade Desk at 12:30 GMT (8:30ET)

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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