The Weekly Update: Technical Crossroad Noted in AUD

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AUD Technical Analysis

The decision to delay the activation of Article 50 until October and news on a possible Quantitative Easing (QE) measures by the Bank of England (BOE) was able to contain a potential crisis for the time being.  It appears QE measures seem to have a more positive effect on the markets than interest rate cuts. Although the immediate reaction may be to short a currency as QE often means a devaluation of the currency but we have seen the last impact of the European Central Bank (ECB) QE on the Euro.

The Australian Dollar (AUD) enjoyed moderate gains, in tandem with gold and global equities. We have discovered a technical entry in EURAUD but were on hold for a better price that will enhance the risk reward ratio.

EURAUD Daily Chart

Please click on the chart to enlarge:

EURAUD Daily Chart 03/07/16

EURAUD Daily Chart 03/07/16

It is a rather complex entry as there is nothing preventing the price from re-testing the lows before reversing higher. As it is a daily chart we assume the RBA monetary policy may be the trigger for the bullish signal. We highlight that re-tests are not guaranteed but must be anticipated even if they do not occur. What will certainly assist us is a gap lower, which would reduce the required size of the protective stop.

We crossed EURAUD with other AUD pairs and crosses to determine if it anticipated gains may be due to a strong Euro a weak Aussie. The results were inconclusive. It appears the Australian Dollar has reached a crossroad. While EURAUD and GBPAUD have a potential for reversing higher it is challenged by AUDUSD and AUDNZD. We are taking the cue from Aussie Kiwi as we noted the potential for a bearish flag on the daily chart and are not anticipating a strong NZD.

We are aware of the negative interest that will be incurred at the rollover but the life expectancy of the trade is expected to be short as this is a daily chart rather than a weekly / monthly chart.

Although this may be irrelevant to AUD, Mark Carney is due to hold a press conference on Tuesday. We are likely to refrain from all GBP pairs and crosses until we near the BOE monetary policy meeting in mid July, 2016.

EURNZD Weekly Chart

Please click on the chart to enlarge:

EURNZD Weekly Chart 04/07/16

EURNZD Weekly Chart 04/07/16

We have been monitoring EURNZD along with EURAUD. The recent lows provided a re-test of a strong weekly support level. Similar to our GBPCHF, we are not expecting a medium-term reversal but temporary gains on a weekly chart level. It is a rather complex entry but we are willing to take the risk.

EURNZD Trade Alert

Please click on the chart to enlarge:

EURNZD Weekly Chart 04/07/16

EURNZD Weekly Chart 04/07/16

EURNZD long at market price (1.5423)
Take profit: 1.5740
Protective stop: 1.5297
Risk Ratio (RR): 1 : 3 (approx.)
Estimated duration: 14 days

05/07/16 UPDATE: EURAUD is trading at 1.4834 at the time of this writing. We were hoping for a higher close. We are closing 20% of the long trade at market price and shift the protective stop to 1.4794.

Please click on the chart to enlarge:

EURAUD Daily Chart 05/07/16

EURAUD Daily Chart 05/07/16

We will be relatively close to the market but it is a daily entry and cannot allow the trade to float with the stop at its prior location.

05/07/16 UPDATE II: EURNZD is trading at 1.5474 at the time of this writing.

Please click on the chart to enlarge:

EURNZD Weekly Chart 05/07/16

EURNZD Weekly Chart 05/07/16

We are closing 20% of the long trade at market price and shift the protective stop to the entry.

06/07/16 UPDATE: While EURNZD was able to sustain its gain, we have witnessed a relatively strong Aussie. EURAUD triggered the protective stop loss order, ending the trade with a minor profit.

06/07/16 UPDATE II: EURNZD is trading at 1.5534 at the time of this writing.

Please click on the chart to enlarge:

EURNZD Weekly Chart 06/07/16

EURNZD Weekly Chart 06/07/16

We are closing 20% of the long trade at market price prior to the FOMC minutes. Stop remains at the entry.

EURNZD failed in resuming its uptrend. Strong NZD was noted in the markets, which triggered the protective stop loss order at the entry. EURNZD long trade ended with a fair profit.