AUDNZD Might Have Reached the Extreme of Its Range

Seeing as how both the Australian and New Zealand dollars are considered the high-yield currencies among the majors, there is some level of buffer to violent swings in risk appetite. Nonetheless, the slow trends that this pair takes over time reveals there is a bias for which currency is considered to be positioned for the greatest increase in yield with time – and that prejudice currently falls in the kiwi’s favor. It is important to recognize that risk appetite (and this pair’s correlation to this underlying driver) will not disappear. Therefore, our setup has to take this reality into account. In establishing support, we are fundamentally accounting for a rally in the kiwi’s favor that has been founded on speculation for a time table for rate hikes from the RBNZ; but the reality is that the RBA holds a premium over its counterpart and is still far more hawkish in their disposition. As for the position, we have recently formed what could be a double bottom with the April lows around 1.2050/20 that is further established through a long-term Fibonacci retracement and as the bottom of a prominent trend channel. Our stop is purposefully wide as reversals can be extended before finally correcting. Timing is also a factor. A reversal should occur relatively quickly; so if we are not entered by tomorrow, we will cancel all open positions.