Price Action
The AUD/NZD pair has fallen quite dramatically in recent weeks. After posting a yearly high of 1.1176 back in August, it has since fallen all the way down to 1.0620, which is equivalent to a fall of 556 pips.
Looking further back in time, the price has generally been trading in a fairly predictable sideways trading range, generally fluctuating between 1.13 and 1.03, so there is nothing unusual in these recent price movements.
However the key point I want to make in this article is that the price is now approaching a key support level that may well prevent the price from falling a lot further.
Support Level
Although there has been a lot of sideways movement, if you look at the weekly chart above, you can see that the price has been slowly trending upwards since 2015 (indicated by the rising trendline), and has always found support when it has come close to this trendline, bouncing off it on 5 separate occasions.
Future Price Direction
Based on this key support level, you would have to say that the price is highly likely to reverse and move higher as it gets closer to this trendline.
Therefore as the trendline is currently around the 1.0600 level, it may be worth watching for possible reversal signals on the daily chart to look for opportunities to go long, although as always, I am not recommending any trades or offering any advice. These are just my own thoughts and opinions.
Pin bars and divergence patterns on indicators such as the RSI, stochastics and MACD are examples of some very effective reversal signals that are worth looking out for on the daily time frame.
The bigger picture is always best viewed on the weekly time frame, but it always a good idea to zoom down to shorter time frames, such as the daily time frame in this instance, in order to spot the reversal signals earlier and get a better entry point.
Profit Target
If the price were to move higher, there is the potential for the price to move back up to the 100 and 200-day exponential moving averages on the daily chart, which are currently around the 1.0860 mark, 240 pips higher, particularly as the 200-week moving average is currently around the same level.
However there are still no guarantees of anything at this stage because trendlines don’t last forever and the longer they go on, the more likely they are to be broken.
This is why there is a need to look for definitive reversals around this level rather than blindly opening long positions at 1.0600 in the hope that the trend will resume.
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