Since my last commentary on the AUDNZD on January 4th, the pair has rallied 130 pips. The setup materialized on a break of trend line resistance that extends from the October 26th high.
More specifically, we were looking for the 1.0420/30 area to hold as support following the break. The low since that time is 1.0423.
Then over the weekend I commented on how the 1.0500 and 1.0600 areas could act as minor resistance on the way up. You may have noticed that Tuesday’s session breached the 1.0500 handle by a considerable margin.
With this break in mind, traders can begin to watch for buying opportunities on pullbacks to the 1.0500 support area. And while I do think 1.0600 could attract a few sellers, my final target is 1.0765.
A daily close above this area would represent a much larger (bullish) development.
In November of last year, we discussed the potential of a six-month inverse head and shoulders pattern. And considering the recent swing low at 1.0353 never came close to taking out the head at 1.0236, that structure is still intact.
However, there’s still a lot of ground to cover before we begin to consider the implications of a 530 pip reversal pattern. For now, it’s all about the levels you see in the chart below.
Want to see how we are trading this setup? Click here to get lifetime access.