AUD/NZD pulls back to key support zone for swing trade long

We’ve been waiting for AUD/NZD to retrace from its cycle high to reconsider longs, and it has now once again piqued our interest. Prices found support at the 200-day EMA yesterday, with the 38.2% Fibonacci retracement holding today’s low nearby.

Whilst RSI (2) is not quite overbought, it is not far from it which suggests we could be approaching a cycle low. It is also trading lower for a fourth consecutive day to also suggest mean reversion (higher) may not be too far away.

• Should we see evidence of a swing low on the 1 or 4-hour chart, we’d be tempted to scale in to a long with a stop beneath either the bullish trendline or 50% retracement level.
  
• We could then tighten our stop and add to the long position if the momentum begins to turn higher on the daily chart.
  
• 1.1000 is the initial target near last week’s high, with the potential for a move to 1.1045
  

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The market stopped just a few pips away from 1.10, and prices have now consolidated.

Keep in mind that the RBA are expected to hike by 25bp today, but a 50bp cannot be ruled out (or a hawkish 25bp hike). Either way, that could support the Aussie.