Fri, Jan 9 2009, 06:16 GMT
by Daily FX Research Team
The beginning of October saw the Australian Dollar bullishly rebound from the kiwi’s buying spree. As the RBNZ aggressively slashed interest rates in an effort to pad its three consecutive quarters of negative growth, traders began selling the isle-nation’s currency. RBA officials too drastically cut overnight rates on fears that the slowing global economy would soon hit home. However, Australia has thus far been able to stay afloat as no quarterly period has been subject to negative growth. Furthermore, Bloomberg forecasts for at least the next four three-month periods call for continued, albeit slowing, increases in gross domestic product. Recent comments by New Zealand Prime Minister John Key have shed no positive light on his economy; he as stated that expansionary growth figures won’t be expected until 2010.
With the fundamental picture heavily in favor of the Australians the prospects for a resurgence of New Zealand Dollar strengths are minimal.
For the time being, an opportunity to hedge one’s downside exposure is in the works. A buying trend shows multiple-top resistance in the near-future. The entry rate, 1.2260, has been a source of significant selling pressure, spanning from August of this year. As such, we may see a short-term retractive pullback that may lead the pair towards the bottom of the channel shown in the chart below. We will set our target at the intersection of channel support and the 23.6%, 1.2006, fib level of the 10/10-12/08 bull-run. Furthermore, we will set our stop-loss substantially higher than the multiple-top resistance level.
Currency Pair: AUDNZD
Long Term Bias: Bullish
Long Term Position: Holding long
Short Term Bias: Bearish
Short Term Position: Sell above 1.2260, Target: 1.2006, Stop-Loss at 1.2421
Traders looking to protect their existing long AUNZD position or enter long at a favorable price may consider a hedge short AUDNZD above 1.2260 with a target at 1.2006. Once the profit target is hit, we expect the bullish trend to resume. We will maintain a stop-loss on our hedge position should AUDNZD break out to the upside prior to the limit being hit. We will set a tight stop-loss near 1.2421, above multi-top resistance.
Created Using FX Trek IntelliChart – Prepared by Luis Gil
Markets hardly ever trade in the same direction for long. Though there are general trends that may unfold for weeks, months and years; there is almost always considerable fluctuation in price during these periods – sometimes leading to significant retracements. There are a few common strategies that traders use to immunize their risk to counter-trend moves while still holding to the long-term trend. One method of reacting to these changing tides is to actively enter and exit a trade on each swing, which requires constant attention and a superior ability to pick tops and bottoms. The other, more passive, strategy is to hold on for the long-term trend through retracements in the belief that the higher trend will reengage. Taking a temporary hedge positions through the counter-trend moves, on the other hand, requires less accuracy in picking tops and bottoms and at the same time lowers the drawdown while increasing the potential for return.
The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service.
For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp.
Published on Fri, Jan 9 2009, 06:19 GMT
Forex Capital Markets LLC
| Financial Square 32 Old Slip, 10th Floor, New York, NY 10005 USA
http://www.dailyfx.com/ | research@dailyfx.com
Asia Market Update - Aussie Trade Balance Registers Second Consecutive Deficit by TradeTheNews.com
Thu, Jul 2 2009, 12:24 GMT
Morning Report - NZD fell from 0.6550 to 0.6440, and the AUD/NZD cross rallied to a 1.2520 high by Westpac Institutional Bank
Wed, Jul 1 2009, 05:33 GMT
Morning Report - AUD followed the broader dollar move and rose from 0.7985 to 0.8095 by Westpac Institutional Bank
Tue, Jun 30 2009, 05:35 GMT
Daily Video Recap - Greenback and Yen Slide as Equities and Commodity Prices Rise by CMS Forex
Tue, Jun 30 2009, 00:38 GMT
Market Session Recaps - London Session by FOREX.com
Fri, Jun 26 2009, 10:32 GMT
Australian Motor Vehicle Sales Up Adj 11.8% In June
Dow Jones | Fri, Jul 3 2009, 02:00 GMT
Australian May balance of trade -AUD$556mln
Forex Live | Thu, Jul 2 2009, 01:32 GMT
DATA SNAP: Australia May Trade Deficit A$556M
Dow Jones | Thu, Jul 2 2009, 01:32 GMT
Asian Shares Mildly Higher; Aussie Miners Gain
Dow Jones | Thu, Jul 2 2009, 01:06 GMT
Australian RBA Commodity Index SDR decreases 29.3% in Jun
FXstreet.com | Wed, Jul 1 2009, 06:39 GMT
GET CASH BACK FOR YOUR TRADES! Learn more about the Pip Rebate Program