The reason for this blog entry is simple: The AUD and NZD may be on the cusp of having a serious break down across the board. There is one specific currency I am 1) currently long 2) am looking to add to my position.
The EUR/AUD is on my “hit list” today and here is the main reason why: As the market’s focus shifts from the European debt crisis to the weak fundamental data streaming in from China. Australia may take center stage as the market’s whipping boy, and this specific pair looks poised for a recovery.
In the past I have had great success and some failures with this pair. Twice last year I rode the pair from the low 1.30’s to the high 1.30’s and towards the end of the year I took some losses as the pair dropped below 1.3000 when I was anticipating some risk aversion in the markets. A month or two back I had the pair on my watch list for a possible reversal and actually took some small losses trying to get long, but technically it didn’t hold above the 200 day SMA and as the situation in Greece, Italy and Spain worsened in the last several months the pair fell to new all time lows. Now I think this is the time I am looking for (and trading currently) a big reversal off these historically low levels. Here are the charts and my argument:
On the daily chart, we are a stone’s throw away from trend line (lower) support and 127% Fibonacci extension.
On closer inspection of the daily chart, the candle pattern is a (borderline) bullish engulfing pattern (reversal signal during a bearish/bullish trend) with a broken higher RSI.
The 4 hour chart shows a broken trend line and an attempt to post higher highs. If we do make a stab lower and produce a “higher low” the near term bearish trend may be reversed.
Make sure you follow me @pipczar on StockTwits or Twitter
Disclaimer: I did get long the EUR/AUD post AUD jobs report last night, I have added to my long earlier this morning AND I am looking to add more dependent on the daily close today.