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AUD/NZD Long-term Bottom Still Intact

AUD/NZD Long-term Bottom Still Intact

2014-06-17 16:34:00
Paul Robinson, Currency Strategist

Talking Points:

  • AUDNZD bullish long-term bottom still in play
  • First breakout failed, stop triggered, however….
  • Soon, another solid risk/reward opportunity looks to be presenting itself

Just a couple of weeks ago there were a lot of eyes on AUD/NZD and excitement over the prospects of a big picture bottom having completed with the breakout above 1.0900, but then the breakout recently failed. However, we should still be excited, and here is why – to start with, not all trades work out the way we want, do they?

Nope, and that is something we have to be prepared for; so always have a contingency plan. The very first part of the contingency plan is having a stop in place to prevent unnecessary losses. The trade I made a couple of weeks ago involved buying the first dip back towards the 1.0900 breakout price; a bread-n-butter strategy for getting involved with breakouts – especially in this low volatility environment (best to not chase the action when momentum is weak). I then placed a stop below a level deemed to be a “technical failure” of said breakout. A stop which was ultimately hit when the RBNZ sent NZD soaring on hawkish wordage. Part of the game, but losses were minimal and so if properly executed, there is plenty of room to take another entry.

AUD/NZD Long-term Bottom Still Intact

Here we are a week or so later, closing in on another technical event which could act as support, with a defined stop loss level. What we are looking at is a rising trend-line coming off the March lows. Depending on how you draw it, the level varies. (I could write an entire article (or two) on how trend-lines can be drawn in various ways, I’ll save that for some other time, though.) I have drawn both lines in and find this to be of benefit when finding levels.

Technical analysis is a lot about art, and by allowing some leeway to identify zones of support and resistance we can plan our trade with flexibility. Remember, this price area has been support several times since the 1980’s. With that in mind, in the intermediate-term, Aussie/Kiwi is still making a series of higher highs, higher lows since March, so even though the initial breakout failed, there is reason in the intermediate-term to be bullish.


AUD/NZD Long-term Bottom Still Intact

Chart created by Paul Robinson using MarketScope 2.0.

AUD/NZD is currently sitting in the zone of support, 10800-10750, and with that I am looking for a bullish reversal in price soon to take entry. If this is truly a long-term bottom, one way or another, there will be set-ups either here or higher which offer solid risk/reward ratios to take advantage of. As long as AUDNZD doesn’t sink below 10650, I remain constructive longer-term.

--Written by Paul Robinson of FXSimplified.com

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