FX:AUDNZD   Australian Dollar/New Zealand Dollar
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The AUDNZD             long trade I published a few weeks ago has made good but slow progress. These highly correlated currencies have low volatility relative to each other. I still believe the pair has made a major change in trend and will be looking to increase the trade size should the pair complete the pattern forming on the point and figure 1 box reversal chart shown.
Headwinds clearly lie ahead with the ever slowing chinese market and the various risk aversion themes brewing around the industry. New Zealand acted quickly to increase its bank rate when Australia held firm and eventually reduced its rates, I think this dynamic puts the AUD at the bottom of its cycle and the NZD at the top of it's. Going forward the gap is likely to close giving this trade a boost.
Can you tighten up your stop at this point? Would you add to your winning position here? It appears the upside is roughly equal to the downside at this juncture and for those of us who missed the first publication, wonder if you like the odds of entering here with 50/50 upside/downside? Thanks in advance.
+1 Reply
Hi Tom, thanks for the comment. If the trade materializes I probably will tighten the stop to 1.0565, that is just below what looks like resistance on the daily candle chart. I would stop the trade on a close below that figure. I think that would make the risk reward reasonable. Of course when trading these longer term Point and Figure reversals you add to winning positions quite regularly and accept that the last one will be a loss.
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