AUDNZD has managed to climb back above the 1.0880 handle on the back of strong employment figures for the Australian dollar. The numbers showed a healthy employment change for the month of October along with a reduced unemployment rate, both contributing to a 170 pip rally in AUDNZD over the last 36 hours.
We previously looked at the cross on November 3rd where I mentioned the broader cyclical trend that has been in place for more than 20 years. It shows that the AUDNZD is in its fourth year of declines off of the 2011 top, signaling that a major shift in trend may be on the horizon.
Here is another look at that chart:
To compliment this multi-year cycle we have what appears to be an inverse head and shoulders forming on the weekly chart. The eleven-month reversal pattern would have huge bullish implications if confirmed.
To expand on that, the potential measured move would place the pair near the November 2012 high at 1.2800. However just as the monthly chart above indicates, a move of this magnitude would likely take several months to fully play out.
Of course the current weekly structure leaves a lot to be desired in terms of having a confirmed reversal pattern from which we can develop trade ideas. That said, the potential of such a move makes it worthwhile to keep on my watch list for now.
Drilling down even further, we can see that the pair is back above the 1.0880 handle on an intraday basis. This level has acted as strong support and resistance since the start of 2015 and includes a large gap between the 10th and 11th of June.
While I’m more interested in the larger reversal pattern that is in the works, a close above this level would likely trigger further gains in the near future. Key resistance from current levels comes in at 1.1130 as well as the neckline of the potential inverse head and shoulders pattern near 1.1400.