So, the heightened tension between the US and DPKK should spell doom for equity markets. While things look good at the moment for USD bulls, things might even be rosier going forward. It’s all about the safe haven status enjoyed by the Euro, JPY and USD which is somehow propelling these currencies at the moment. As we can see, over the past couple of days, the USD is finding it hard to gain against the Euro despite negative German industrial production and Sentix investor confidence survey. Small gains in German Trade balance wasn’t a market mover either and the market was literally stuck in consolidation.
On the other side, commodity currencies like AUD and NZD took a beating despite positive Chinese Trade Balance. It might be traders playing safe and taking their profits but it might also be because of the expensive currencies which weigh in negatively in matters trade and inflation. As I noted earlier, these reversals are happening at key levels in the weekly chart and this might be the early stages of major correction back to 0.70 cents-NZD and $0.74-AUD. In the Asian session, the RBNZ took a dovish tone in lieu with recent data especially with slowing GDP and inflation expectations and as a result, the Kiwi tumbled. This in my opinion should continue and that is why, I’m shorting the NZD.
In the weekly chart, the trend higher in the AUDNZD is obvious. However, despite the strong bullish move up, I expect a correction in the 1HR chart as a whole candlesticks are above the upper BB with slowing momentum in the stochastics.
I will therefore wait for buy signal in key support zones in the 1HR chart of this currency pair and only trigger when a buy signal is printed by the stochastics. This will likely pan out as follows:
Buy zone: 1.075-1.080
Stop Loss: Below 1.07
Take profit: 1:3 risk reward ratio
Have a good trading day.