Clear Technicals And Balanced Fundamentals Offer A Unique AUDNZD Range Trade

Daily Forex Technicals | Written by DailyFX | Oct 25 08 06:27 GMT |

Market conditions have deteriorated yet again and volatility has put nearly every liquid pair into a breakout scenario. Any sort of range trade taken in this sort of environment is exceedingly dangerous if the outlook is beyond an intraday time frame. Why Would AUDNZD Stay in a Range? Levels to Watch: Range Top: 1.1500 (Fib, Range, SMA) Range Bottom: 0.8150 (Double Bottom) As expected, panic has kicked up volatility in the currency market yet again. With the dramatic shift in sentiment, most of the viable range setups that survived the price action of the past few weeks saw major breakouts. AUDNZD represents one of the last pairs to retain a clear congestion zone and still have a fundamental cushion to further surges in risk sentiment. With both central banks indicating a slower pace of rate cuts, the pair may find balance. Technically, this pair has been extremely volatile - like the rest of the currency market - but price action has been otherwise contained by surprisingly clear levels. Resistance is our primary concern at 1.15/14 and is defined by notable 50% fib retracement and two weeks worth of daily highs. Support is less reliable in a very brief double bottom. Suggested Strategy Short: We will set entry in the wicks from the past two weeks at 1.1445. Stop: Our initial stop will give a little breathing room above our range resistance at 1.1540. To reduce risk, the stop on the second lot will be moved to break even when the first target is hit. Target: The first objective equals risk (95) at 1.1390. The second target is 1.1175. Trading Tip - Market conditions have deteriorated yet again and volatility has put nearly every liquid pair into a breakout scenario. Any sort of range trade taken in this sort of environment is exceedingly dangerous if the outlook is beyond an intraday time frame. To reduce our risk, we are once again dipping into the Aussie dollar pool to use AUDUNZD as a pair with a natural fundamental buffer to the recent, dramatic swings in risk appetite. However, the stability this pair has shown over the past few weeks could change very quickly; so any positions should be tracked closely while stops and targets should be placed and followed mechanically. Our suggested strategy looks for entry amid the forest of upper wicks and doesn't push the absolute extreme of the range. The stop is relatively wide, but it would not survive a false break. To keep with the broader market trend, we will only consider a short in this trading band. No orders should be set during the weekend as a gap could easily knock a position in only to have it stopped out. To limit risk we will cancel all open orders by Wednesday. Event Risk Australia And New Zealand Australia - In only a few months' time, the outlook for Australian growth and interest rates has marked an abrupt change. Initially fundamental traders and policy officials believed the domestic economy would survive the global crunch; but that quickly changed as a lack of demand began to seep in prices for key Australian commodities. With the additional help of a spreading credit problem, forecasts for domestic spending soon fell inline with the rest of the world. After a 100 basis point rate cut at their last meeting, the Australian dollar is set on a dovish path; yet the outlook for additional easing is taking a much more reserved pace. Now, policy officials seem to be taking a wait and see approach with the data taking a greater importance in future decisions. Upcoming data will certainly redefine the policy landscape. Aside from credit and leading indicator reports, third quarter business confidence will take measure of activity going into the financial crisis. More critical to growth will be the third quarter housing and retail sales readings though. New Zealand - There is little in the way of scheduled event risk over the coming week from the New Zealand dollar. This is perhaps fortunate for the currency as there is perhaps a greater interest in data after RBNZ Governor Alan Bollard delivered a 100 basis point this week and announced that he would take a more restrained approach to policy future policy decision. This suggests that central banker will want to see how such a sharp adjustment to lending rates will impact domestic lending conditions and economic activity. Nonetheless, should general risk sentiment take a sudden turn over the coming work, the kiwi dollar will likely take on the features of the market's premier carry currency. Data for October 26 - November 2 Data for October 26 - November 2 Date Australian Economic Data Date New Zealand Economic Data Oct 27 NAB Business Confidence (3Q) Oct 28 Trade Balance Nov 2 AiG Performance of Mfg Index (OCT) Oct 29 NBNZ Business Confidence Nov 2 House Price Index (3Q) Nov 2 Labor Cost Private Sector (3Q) Nov 2 Retail Sales (3Q) DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. 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