Weekly Time Frame – AUD/NZD 03/06/2020 20:00pm

Technical

As illustrated above, AUD/NZD has been trading in a wedge-like structure.

Prices are currently testing the upper weekly trendline support. It is evident this weekly trendline has been a strong barrier for this pair, with multiple previous rejections.

A close below the weekly 200-day EMA at 1.06944 is likely to see prices fall.

4-Hour Timeframe - AUD/NZD 03/06/2020 20:00pm
4-Hour Timeframe – AUD/NZD 03/06/2020 20:00pm

The 4-Hour timeframe shows a clear channel up structure forming. Currently prices have rejected from the weekly trendline resistance, this is likely going to push prices towards the lower trendline support of the channel up structure.

A break below the channel could provide a long term short opportunity. However, a more conservative area of selling interest would be around the weekly 200 day EMA at 1.06944. It is evident on the weekly chart that prices have a tendency to spike above the weekly resistance trendline before falling, therefore this possibility could occur once more here.

Fundamental

Overnight , the Australian economy had observed a GDP reading of -0.3%, for the first three month of the year, ending in March. This is the first decline in 9 years.

Australian Treasurer Josh Frydenberg said that the next quarterly reading is going to be a lot worse than the Q1 readings ending in March. Thereby presenting the risk of a recession ( a recession typically occurs after two straight quarters of negative GDP).

Whilst positive Chinese PMI has supported AUD and NZD prices, it is only a matter of time before reality sinks in.

Trade Details

Potential Entry: (RISK ENTRY) When/If prices break below the channel structure at around 1.07240 OR at the break below the weekly 200-day EMA at 1.06944 (CONSERVATIVE ENTRY).

Potential Targets:

TP1 (For risk entry only)1.06807
TP21.06237
TP31.05877
TP41.04814

Potential Stop: At around 1.08427.

This trade carries a risk to reward ratio of around 2.3, with a maximum potential loss of 122 pips and a maximum potential gain of 275 pips. We strongly advise you place stop losses at entry once a trade is at least 15 pips in profit

Trade Updates

  • AUD/NZD has reached the first target at 1.06807, generating +50 pips. Note this is only applicable for the proposed risk entry. Manage risk accordingly.
  • TP2 and TP3 have now been met at +105 and +145 pips respectively.