Last month I mentioned a pattern that is unfolding on AUDNZD that could lead to a multi-year bull trend. Shortly after that post, the pair managed to climb more than 300 pips to settle firmly above the 1.0880 handle.
However, since November 24th, the pair has lost more than 200 pips and is once again testing this resistance-turned-support level.
While some may be inclined to watch for a break back below the level, I tend to look at this type of price action in a different light. With my longer-term bullish bias still intact, I want to see if the recent price action is more closely related to a period consolidation rather than another leg down.
If this is in fact consolidation, it could lend itself well to a long entry once the pair breaks free. Of course in order to take advantage of a continuation of the recent five-week rally, we need a favorable continuation pattern from which to trade.
A look at the 4 hour chart shows what could be a descending channel that extends off of the highs from November 25th and December 3rd. What is interesting about this particular price structure is where the potential measured objective lines up.
As you may remember, the neckline of the potential twenty four-month reversal pattern is found near 1.1430. It just so happens that the 590 pip measured objective from this potential bull flag lines up with the neckline of the weekly reversal pattern.
Note that the consistent use of the word “potential” serves as a reminder that nothing is confirmed just yet. This goes for both the larger weekly pattern as well as the intraday structure in the chart above.
Therefore, this is simply one to keep on your watch list for now to see how the next few sessions play out.
Only a close above channel resistance would confirm the setup and offer an opportunity to get long while a close below support would negate the trade idea. Key resistance comes in at the inverse head and shoulders neckline near 1.1430.