AUDNZD Corrective Rally (D,M)
Created on Monday, 04 January 2016 11:57
Written by Austin Galt
The AUDNZD pair has traded as laid out in previous analysis. Let’s update things using the monthly and daily charts.
AUDNZD MONTHLY CHART
Previous analysis called for a point 4 high as part of a 5 point broadening low formation. Since then price has dropped in line with the forecast however I suspect a corrective rally is now at hand.
The Bollinger Bands show the point 4 high at resistance from the upper band and price subsequently headed back down to just below the middle band. I think some support can come in here and send price back up to have another lash at the upper band before resuming the downtrend to a final point 5 low.
I have drawn a Fibonacci Fan from the 2000 high to 2005 low which has been displaying some nice symmetry with this broadening low formation. The points 1 and 3 lows were around support from the 61.8% angle while the point 4 high was at resistance from the 76.4% angle. I think price is now headed back up to test the 76.4% angle where I favour resistance to come in once again.
I have drawn two horizontal lines which appear to be where there is a concentration of trading. The upper horizontal line denotes the point 2 high at 1.1302 while the lower horizontal line denotes the point 1 low at 1.0490. I think price is headed back up to around the upper horizontal line.
There is already a reverse head and shoulders pattern in play with the point 1 low the first shoulder, the point 3 low the head and the recent low setting up the second shoulder.
Price now looks headed up to set up a normal head and shoulders pattern with the point 2 high the first shoulder, the point 4 high the head and the expected rally high the second shoulder. Given my analysis, I expect this normal pattern to win the battle to be confirmed.
The Stochastic and MACD indicators are both currently bearish although that could easily change and will do should price rally now.
AUDNZD DAILY CHART
The PSAR indicator has a bullish bias after price busted the dots on the upside a couple of days ago. The dots now stand at 1.0570 and I suspect price will head down to test that support before trading back up. Breaking that support will likely nullify this analysis and certainly trading to new lows below 1.0495 will.
I am viewing the price action as an ABC correction with waves A and B already completed. That means price is now at the beginning of wave C.
Corrective price action is often choppy and includes deep retracements and the recent wave B low was bang on support from the 88.6% Fibonacci retracement level.
I have drawn a Fibonacci Fan from the August 2015 high. This shows the wave A high around resistance from the 61.8% angle with price subsequently trading down between that angle and the 50% angle. The wave B low was bang on this support angle and I now favour a move up through the next couple of angles. Perhaps the wave C high will be at resistance from the 88.6% angle.
The horizontal line denotes the September 2015 high at 1.1353 which I expect to act as resistance and a high around that level would set up a bearish double top with the trend Let’s see.
The recent low showed multiple bullish divergences on the RSI while the MACD indicator is bullish.
Summing up, while the overall outlook remains bearish I suspect a bear rally is now in play.