AUD/NZD Forming a Bottom and Near Upside Breakout Levels
Cory Mitchell, CMT
Since 2017 the price has bounced aggressively when it reached between 1.04 and 1.025 (rounded). The ensuing rally was at least 350 pips, from the low, and up to 900 pips (rounded).
In 2020 the pair has moved down to the 1.0315/10 area twice so far, and then rallied to the upside, meeting resistance at 1.0450/60. The price is currently hovering at 1.0430, just below that resistance level.
This has formed a small range between 1.0460 and 1.0308. If the price breaks higher out of the range I am looking for a target in the 1.07 to 1.0750 region, which provides 240 to 290 pips of upside.
Over the long-term term, the broader range, extending back to 2014, provides resistance near 1.13. But I'm not concerned with looking out that far just yet.
Note: The Jan. 3 2019 long-wicked candle varies significantly by broker. This default broker on TradingView (Oanda) shows the price hit below 1.01. Other brokers saw the price barely drop below 1.02 or even 1.03. Therefore, you will notice a significant difference in price on that bar depending on your broker.
The Downside Scenario
1.04 and 1.025 is an important multi-year support area. It doesn't mean the price can't drop below it. On two occasions, in 2015 and 2019 (depending on your broker), it has.
Despite this, the downside is likely limited to 100 pips, down to 1.03 or slightly below.
In the short-term though, it is possible the range could continue. If the price consolidates near 1.0450 and then breaks to the downside, that setups up a short-term opportunity to profit from a decline. Target goes near 1.0350.
Give the proximity to support, once the price gets down near 1.0350/1.03 I will once again be looking for an opportunity to get long.
The AUD interest rate is 0.75% while the NZD rate is 1%. Therefore, holding a long position (AUD) will result in paying a small interest charge each day. Holding a short position (AUD) will result in a small amount of interest income. Rollover rates vary broker, and given the small discrepancy between the two interest rates some brokers may charge a small amount of interest regardless of the position direction. The long will cost more interest.
Whenever dealing with breakouts, also remember that false breakouts are an important part of trading. Take advantage, don't get frustrated. See False Breakouts are Key Trading Opportunities.
By Cory Mitchell, CMT. Join me on Twitter @corymitc.
Disclaimer: Nothing in this article is personal investment advice, or advice to buy or sell anything. Trading is risky and can result in substantial losses, even more than deposited if using leverage.