Following The Trend And Avoiding Event Risk With An AUDNZD Range Trade

We attempted an AUDNZD range trade earlier this week in the face of looming event risk.  Ultimately, the gamble would not pay off as a surprise retail sales report from Australia drove AUDNZD on a false break that ran our stop loss. This time around, however, conditions have changed. First of all, the economic docket for both economies is relatively clear of major release until after the mid-point of the week. And, from a technical standpoint, we are now at the bottom of the rising trend channel that we were monitoring when taking the last trade.

Trading Tip – We attempted an AUDNZD range trade earlier this week in the face of looming event risk.  Ultimately, the gamble would not pay off as a surprise retail sales report from Australia drove AUDNZD on a false break that ran our stop loss. This time around, however, conditions have changed. First of all, the economic docket for both economies is relatively clear of major release until after the mid-point of the week. And, from a technical standpoint, we are now at the bottom of the rising trend channel that we were monitoring when taking the last trade. Taking a long near support will leave us in line with the overall market trend.  What’s more, the trendline that marks our moving range bottom is further supported by a 20-day SMA and 61.8% fib of the recent swing high. Our entry looks is relatively close to hard support, but this is necessary due to the limited profit potential for our squeezed range. Considering the rising market, an aggressive trader could set their second target above resistance looking for a break. We will cancel unexecuted orders on Wednesday or if spot its 1.1440 before we are entered.

Event Risk Australia and New Zealand

Australia – Aussie event risk will largely die down in the week ahead, but traders should watch for a particularly significant Employment Change release due the 16th. Our recent AUD/NZD range trade was regrettably stopped out by a surprising AUD Retail Sales report, and we remain wary of typically market-moving Australian data. That said, the coast remains relatively clear for range trading ahead of the 16th. Second-tier TD inflation, ANZ Job Advertisements, and Westpac Consumer Confidence have not shown the tendency to force major moves in the Aussie. Yet we will remain on the lookout for surprises out of the key Employment Change results.
 
New Zealand – The New Zealand economic calendar is similar to that of Australia, as an entirely week of event risk is almost entirely concentrated in one report. Consumer prices are almost-guaranteed to force volatility across NZD pairs, and we will be particularly mindful of any surprising results out of the report. Some forecasts call for the headline year-over-year inflation rate to breach the Reserve Bank of New Zealand’s 1-3 percent target range at 3.1 percent. Such a result could easily shift forecasts for Kiwi yields and, by extension, the Kiwi itself. Otherwise markets will likely ignore earlier second-tier data, while a Retail Sales report may likewise bring short-term volatility across NZD pairs. 

 
Contact John or David about this article at jkicklighter@dailyfx.com or drodriguez@dailyfx.com