The rise in volatility on Monday, August 24th triggered breakouts in several currency pairs, namely the yen crosses. However this volatility also tarnished a lot of technical patterns that had been forming for weeks or even months.
One pattern that remains unphased by the recent volatility is the wedge pattern that has been forming on AUDNZD since the beginning of July.
I figured this pattern would begin to fall apart after the August 24th spike that saw the pair rise 170 pips above resistance on an intraday basis, but that doesn’t appear to be the case. The same resistance level was just respected for a fifth time sine July 2nd. So despite the 170 pip intraday spike, the integrity of this wedge pattern remains intact.
This means we can continue to watch for a daily close above the resistance level, which would signal a potential buying opportunity. The pattern is being labeled as bullish due to the recent 1,400 pip rally off the multi-year low at parity, so in context this wedge can be viewed as consolidation before the next leg up.
Taking the height of the pattern, we come up with a measured move of approximately 500 pips above the breakout point. This puts the final target in the 1.1700 area. Of course the official target will depend on where exactly the pair breaks resistance, if at all.
One thing the August 24th spike does tell us is that the first layer of resistance can be found at 1.1420. This level marks the session high which also lines up with the current 2015 high at 1.1428. Break that and the target of 1.1720 is well within reach.
Like any trade idea in the Forex market, there is a chance that it may never materialize. In which case we do nothing in order to protect our trading capital and simply move on to the next idea.
Summary: Watch for a buying opportunity on a daily close above wedge resistance. The first level of resistance from there can be found at 1.1420 with a measured objective at 1.1700. Alternatively, a daily close below support at 1.0900 would negate the bullish bias and expose key support at 1.0580.