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AUDNZD: Playing The Range
Submitted by Nic Lenoir of ICAP
As volumes are abysmal this week, we continue to think the risk
is for lower US Treasury prices as supply chokes the market in low
volume/appetite on this holiday week. Equities keep grinding higher and
are getting awfully close to resistance levels, with ever lower volumes
"supporting" the price action.
In such
an environment and assuming you are not short US Treasuries from 2
weeks ago, we recommend sticking to more benign and lower beta trades.
AUDNZD has been consolidating sideways ever since testing support
around 1.2450, and we tested and rejected overnight the resistance of
the consolidation channel at 1.2550 (see intraday chart). We remain
under the multi-year resistance we rejected recently at 1.28, and one
should expect we will either further consolidate in the daily channel
(see daily chart) between 1.1950 and 1.2850, with the next move being
to test support around 1.1950/1.20, or go back test the support of the
multi-year triangle between 1.05 and 1.10. Either way it appears the
medium term direction is to play the downside. Either sell 1.2550 or a
break of 1.24 with a stop above 1.2650, and a target of 1.20.
EURGBP
is another trade we have discussed in the past. Our view remain that
the market should rally past 0.95 in the medium term and we recommend
buying in the 0.8920/0.8980 zone to build up long positions. We would
stop on a daily close below the daily channel (approximately 0.88) and
add on a break of 0.9150.
Good luck trading,
Nic
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Stock market will be in rally mode maybe 3-5 weeks more. Expect real rush next week!
Things are so FUBAR stateside and Euroland that we have to take a look Down Under. Lulz. Oz and Kiwiville are little too esoteric for me, though. NZ does seem a far saner place than the States these days.
Look at the yen crosses also, if you are either long the AUD vs the JPY or the NZD/JPY you have the overnight carry as well as your trade plans. Careful with the overnights, costly if mismanaged.
+100
Been long AUD/JPY for past week.
well said, johny9iron.
thanks for sharing your thoughts with us, Nic.
anyone read this?
http://www.nuwireinvestor.com/articles/european-commercial-property-sale...
any insight from people from Euroland?
The key to the AUD/NZD trade is the Reserve bank of Australia keeping their finger on the interest rate trigger. That is a threat; not range trading.
Range trading works best in the doldrums of summer when there is no news is good news. The problem now is that the volatility is so far off the charts that it is truly not range trading but taking a roller-coaster ride through Whipsaw City.
Don't leave an overnight in the Asian currencies unless you have extremely tight stops, are going to be up at 2 am,or you just don't mind seeing your money pissed away.
Be careful out there...
Well said. Whip saw is good if you have a plan and you are trading intraday. When planning to carry overnight Orly is 100% correct--be careful.
AUD-NZD, 80% of NZ merchandise trade is via AU, +80% of banking capital flows is on AU bank (branch basis) balance sheets. RBA owns & manages the AUD-NZD cross. When it breaks the AU banks break and down goes sovereign AU. A Soros couldn't organise the play pound style now and the US govt won't let it happen. So ICAP is partly right, but on anything but fundamentals because they are stupidos; whenever there is a dollar short the RBA jumps on the kiwi cause in response. Trade it.
+1