Watchlist: AUD/NZD Downtrend Setup?

After a sluggish grind decrease in June, draw back momentum has picked up in AUD/NZD in July. What’s taking place and do the bears nonetheless have legs?

AUD/NZD Downtrend Setup?

AUD/NZD 4-Hour Forex Chart
AUD/NZD 4-Hour Foreign exchange Chart

On the 4 hour chart of AUD/NZD above, we will see the bears have been kicking butt since mid-June the place the pair topped out across the 1.0800 main psychological deal with.  The tempo of the downtrend has truly picked up steam in July, probably on the rise of covid-19 circumstances in Australia, sparking lockdown extensions in its main cities like Victoria.

Bullish sentiment has additionally grown on the New Zealand greenback in latest weeks as fee hike hypothesis grew shortly, probably supported by a shock surge in New Zealand inflation information and the finish of quantitative easing by the Reserve Financial institution of New Zealand. New Zealand has additionally been very profitable with suppressing the covid-19 pandemic, creating an setting for his or her economic system to proceed recuperate.

This setting is more likely to proceed for the subsequent few weeks, and volatility is more likely to keep elevated for AUD/NZD over the subsequent few weeks as we get quarter inflation information from Australia on the finish of July, and financial coverage statements from each the RBA and RBNZ within the first half of August.

Given the present setting and outlook that the RBNZ might hike charges and that Australia might proceed to really feel the sting of the rise of covid-19 case, this makes AUD/NZD a possible candidate for a swing commerce, and even longer-term brief place. This commerce would even have a stronger likelihood of success if international danger sentiment shifts again to constructive, provided that the Kiwi tends to outperform the Aussie in a risk-on setting.

We’ll be watching AUD/NZD for a few brief entry setups if this setting holds. First, presumably a nibbler entry on a break of the minor assist space presently across the 1.0550 deal with. Or if the pair bounces from the present ranges, we’ll be on a glance out for a retest of the 1.0600 – 1.0650 space for bearish reversal patterns earlier than placing on a extra vital place dimension.

With a weekly ATR of round 100 pips, that places a possible invalidation value space above the 1.0700 stage if utilizing a two weekly ATR as a cease information; loads of house to provide this commerce room to breath over the subsequent month and climate any potential surprises.

What do you all assume? Does AUD/NZD nonetheless have legs to make new lows after a robust run within the first half of July? Let me know within the feedback part under!

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