The AUDNZD has come off recent highs after a November 22nd surge took the pair to the 1.0610 handle. And as has been the case for much of 2016, the Aussie cross has settled into another tight trading range.
However, this time around we may have an actionable pattern at our disposal. A look at the 4-hour time frame (second chart below) shows a wedge that has been forming since late October.
This formation is occurring at what could be the right shoulder of a six-month inverse head and shoulders pattern.
I mentioned the price structure above just before the November 9th U.S. elections and subsequent RBNZ rate decision. We also discussed the pair last week where I revealed a few critical elements that make this type of pattern tradeable.
But for now, the bullish reversal above is just an idea of what could materialize in the coming weeks. Without a daily close above the 1.0765 neckline, the pattern is unconfirmed and thus untradeable.
With that said, a wedge pattern such as the one below could offer an early opportunity to get long. For that to happen, we’ll first need to see a 4-hour close above wedge resistance.
If we do get a break to the upside, it could offer a chance to pyramid into an extended long position. On the other hand, a break of support could very well negate the potential six-month inverse head and shoulders.
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