Analysis of the Forex AUDNZD market and possible price movements

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Tuesday’s “How to Trade Tapering” case study / exchange idea pays off. There is some surprise in how strong the current momentum is, and even those without a position might do well to follow its progress. With a range of endings induced by the shrinking timeline, it would be helpful to get a sense of how strong the market moves are.

Long Aussie – Short Kiwi – Tuesday Trade Entry Point 1.04571

AUDNZD – Daily Price Chart – Aug 2020 – Oct 2021 – Trade Entry Point

AUDNZD - Daily Price Graph - August 2020 - Oct 2021

Source: IG

AUDNZD – Daily Price Chart – March 2021 – Oct 2021 – Trade Entry Point

AUDNZD - Daily Price Graph - March 2021 - Oct 2021

Source: IG

AUDNZD – Daily Price Chart – 12e Aug 2021 – Oct 2021 – 2 days after trade entry point

AUDNZD - Daily Price Graph - August 12, 2021 - October 2021

Source: IG

On the two-month price chart, the daily RSI has moved above 70, but that has yet to translate into weaker price action. Reference to 16e and the 30e from August, when the RSI hit 30 and suggested the market was oversold, the price continued to move down, so the trigger of 70 does not suggest at this point to exit the trade.

The Forex Traders analyst note on Tuesday highlighted how the AUDNZD situation is where CFTC data pointed to a record of short selling the Aussie and buying the Kiwi. The bearish trade was overcooked – therefore, the price did not rebound when the RSI was at 30, so we can expect something similar. The RSI of 70 could prove to be a relatively unreliable indicator as the previous trade unfolds.

Resistance from the red dotted downtrend line was washed away in Wednesday’s trading. The pent-up overextension of momentum in the two currencies opened the door to a dramatic move that was confirmed when the RBNZ announced an interest rate hike of 0.25% and dispelled any doubts about a key rate hike of 50 basis points. For those who are long, the size of Wednesday’s green candle is a welcome sign that there is a wave of buying pressure in the market.

Potential target prices

Price target 1: The current price level of 1.0535 is the first sell indicator thanks to the 38.2% Fib level going back year to date to the high of 25e March

Target Price 3: 50% Fib level kicks in at 1.0614

Price target 3: The initial price target of 1.07 referenced on Tuesday was primarily based on trendline support between 4 lowse February and the 26e of May. Given the gradient of the current path, the price could reach this line before 1.07. The speed of the current course is quite large, but no trend lasts forever.

AUDNZD – Daily Price Chart – March 2021 – Oct 2021 – Trade Entry Point

AUDNZD - Daily Price Chart - March 2021 - Oct 2021 - Trade Entry Point

Source: IG

Stop Loss Potential

Potential stop loss 1: 1.04141 – Current daily SMA

Potential Stop loss 2: 1.04571 – trade entry point / breakeven point

Potential Stop loss 3: 1.04810 – just below the red dotted resistance line, which should now form support – the most conservative stop loss but locks in some profits on what is already a winning trade.

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