17 Feb AUD NZD Highly Speculative Long Swing Position Entered
AUD:NZD has probably been my one of my favourite FX pairs over the last 12 Months, mainly because every set-up I’ve entered has played out beautifully and in doing so it inspired confidence in each subsequent position.
On this latest trade I may be pushing things a little too far. The set-up is far from perfect but due to the fact I’ve spent so much of the last year trading each AUD:NZD twist and turn, my confidence level may have exceeded my TA ability!
This trade is not solely based on the chart. There are a couple of FX strategists who I follow (who shall remain nameless). They are generally wrong so I like to ensure I’m on the opposite side of the trade to them. One of them has just entered short AUD:NZD in expectation of a sustained move down. He could be right, it’s his job after all whilst I’m just a “clueless” retail trader who places a few lines on the chart. However, he is usually wrong.
Over the last Week the incredibly strong New Zealand Dollar has shown unusual signs of weakness, so, if I’m going to short it I want to do so using another strong currency which is where AUD comes into play.
Based on the chart we have a clear line in the sand in the form of support at 1.2814 which converges with the 50% fib level of last year’s rally and the 200 MA that price is consolidating around. More often than not, tops and bottoms on AUD:NZD are quite a long winded affairs, so if this trade is right I wont be afraid to take profits on a spike up in view of re-entering the position at better levels in the future. If the trade is wrong, 1 or 2 daily closes below 1.2814 will be a clear sign things aren’t going to be smooth.
Ideal initial target would be the red line annotated on the chart.
A specific advantage of trading the long side of this pair is the interest rate differential that pays you to hold the position.