Top Trade Idea for July 11, 2013 – AUD/NZD
Selling into the AUD strength against the NZD
In an effort to avoid the post-Bernanke chaos in the dollar and euro, I am looking a pair where there is both a stable, overall trend, and a lessened impact from the volatility of Bernanke’s statement: “Highly accommodative monetary policy for the foreseeable future is what’s needed in the U.S. economy.”
That brings to a currency that has continued to fuel the trends that I have traded for the past few months* and that is the AUD. The Australian dollar did gain against the U.S. dollar after Bernanke’s dovish Q&A yesterday late-afternoon. But to say that the move was based on the aussie as the driver would be wrong. In fairness to the aussie, while the initial move higher in the AUD/USD was based on USD weakness, the Employment Change release did show that the aussie economy added 10k more jobs than expected (10.3k actual versus 0.3k consensus)
*Admittedly, this is still a longer-term time frame commitment and for some traders – especially during the Summer months – this is an uncomfortable time frame considering the volatile nature of this time of year. For traders that would prefer staying nimble here’s a video I recorded on “When it’s time to “retreat” to shorter time frames”
One of the reasons I am looking to the AUD/NZD is of course sidestepping the U.S. dollar. While I am certainly not saying that the SCOPE and VELOCITY of the move is a surprise, volatility and exhaustion under 85.00 in a market that had not yet transitioned into an established uptrend IS expected. I also like the established bearish Directional Bias (aka a quality daily trend) on the pair. The chances that the AUD will gain on the NZD longer-term is low and this is punctuated by NZ FinMin Bill English’s comments that: “New Zealanders think they are going to have 5 percent rates forever…well they aren’t. They are going to go up, it’s just a matter of when.”
The average price hourly price movement range for the AUD/NZD does put the aggro 1.1745 short sell within reach so this entry has what I call “proximity” in that when parking a limit sell at this level there can be a realistic expectations of getting the trade filled. It’s the conservative 1.1795 entry that may take more time to be reached.
The Point of Validity (”POV”) stop-loss on the trade is 1.1920/30 but a Cheated-In stop loss (”CISL”) at 1.1860 is a smarter way to handle this trend. Look to support at 1.1660 for an initial profit target where I would recommend ratcheting in the CISL to a “Break Even” stop loss to just above the conservative entry which would put it at 1.1805/20 to be able to benefit from the major psychological level resistance and the selling pressure that will likely be waiting there.
About Raghee Horner
Raghee Horner is the Chief Currency Analyst for IBFX. She has written three books published by John Wiley & Sons including her latest, “Forex on Five“. Raghee is a featured contributor at TradeStation, ForexFactory, BabyPips, Investing.com, and is a blogger for the StockTwits Network. Raghee runs a popular morning chat, trading commentary, and alert service at TradeForexFutures.com.