The Aussie and Kiwi currencies are currently stuck together and consolidating against its longer term trend line established at the 1.2104 low on June 10th of 2010. The pair has failed to trend higher from the 1.3797 mark created on March 7th. With no higher highs being formed our uptrend is currently stalled. With clear support being established near 1.3190, traders can look to trade the consolidation pattern or wait patiently for price to break.

Fundamentally the Aussie and Kiwi are normally paired together. There is good reason for this, as both are geographically located in the same strategic position. With a close proximity to China these two economies have seen their GDP growth rate expand on the backbone of exports in the first quarter of 2011. As economies heat up, so does the speculation on interest rate increases. As price consolidates, it looks like it will be up to the central banks and monetary policy , to finally cause a break on the AUD/NZD .

Price Action

Taking price in to a 4Hr chart we can see price finding support near the 1.3090 figure. This price level has been tested once so far on April 15th of this year. This support line coincides directly with our longer term trend line as established on the daily chart above. This will give traders an opportunity to buy with the trend and target the upper bounds of our consolidating Chunnel pattern.

Trading O pportunity

My preference is to buy the AUD / NZD near the 1.3190 support level. We will set our sights at resistance for our profit target at 1.3540, for a total gain of 350 pips. Stops should be set under support near 1.3140 for a 1:7 Risk/ Reward potential.

Alternative scenarios include using entry orders to sell the AUD/NZD upon break of support.

Walker England contributes to the Instructor Trading Tips articles. To receive more timely notifications on his reports, email [email protected] to be added to the distribution list.