AUD:NZD - Potential sell set up.

AUD:NZD - Potential sell set up.

The chart below outlines a potential ABC correction formation for AUD: NZD. This could be triggered by a weak close to today's candle (Saturday morning AEST)

The fate of this set up will probably be determined by Tuesday's RBA meeting. A rate cut or a more pronounced easing bias from the Bank may see Aussie resume its downtrend against the Kiwi.

Personally, I don't think it's logical to view technical analysis as a means of predicting the outcome of news events. What it can do is assist in identifying opportunities where the reward if the news suits the position is likely to exceed the loss if it doesn't. Often the best trades come when the news event turns out differently from what you and most other investors expect

As long as price remains below the old low at "1", the chances favour the Aussie remaining in an impulsive downtrend against Kiwi.

As noted on the chart the recent rally from "3" has the potential to be an ABC correction. If price rejects the current Fibonacci cluster level this would be an ABC sell set up.

This cluster consists of

  • B/C  will be 161.8% of  A/B
  • 61.8% retracement of 2/3
  • B/C will be 161.8% of 3/A

A close below the candle making the recent high would trigger a set up. However, the other possibility is that we continue to push a bit higher e.g. if RBA does not cut on Tuesday. There may still be a set up if we get a trend peak below about 1.3250 I reckon.

For good measure, a set up here would also represent a small false break of the 200 day moving average (green line). I find you often get these set ups just on the other side of an obvious indicator or trend line and this can get them off to a good start as stops are triggered on the move back through the indicator