Want proof that we’re still dealing with the summer lull? Look no further than the numerous consolidation patterns we’ve discussed this week, including those on the EURGBP, USDCAD and now the AUDNZD.
The Australian dollar cross has had a rough time over the last six years. Even after carving what appeared to be a massive inverse head and shoulders pattern between 2014 and 2015, buyers have been unable to lift prices above the 1.1400 area.
Fast forward to today, and we can see that the pair is forming a rising wedge that extends from the July low at 1.0395. The formation hints at exhaustion from buyers and signals a turn lower could be in store for next week.
Because the AUDNZD is known to be more sporadic than other more liquid currency pairs, I need to see two things happen before considering a position here.
The first is a 4-hour close below wedge support near 1.0800. Chances are this won’t occur until next week, but even if it did happen today, I would stand aside as I don’t want to take on exposure ahead of the weekend.
The second thing I need to see following a close below support is bearish price action on a retest of the level as new resistance. This would help confirm the break and also give me an area I can use to hide my stop loss.
I’m going to stay on the sideline until those two things happen. If neither occurs and buyers decide to break resistance next week, we could see further upside here.
However, I won’t consider going long if that happens as I never buy into a bullish exhaustion pattern such as this rising wedge.
A turn lower next week would first target the area just below the 1.0600 handle. A close below that would expose the July low near 1.0400.
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