AUD/NZD at the Cusp of a Bullish Continuation Breakout

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AUD/NZD at the Cusp of a Bullish Continuation Breakout

The AUD/NZD has been consolidating since making a high of 1.0890 in May. For a few weeks now it has been drifting lower in what appears to be a flag pattern in the 4H chart, where we can see a potential bullish breakout.

AUD/NZD 4H Chart 6/1
audnzd 4h chart 6/1
(click to enlarge)

The 4H chart shows price cracking the flag pattern resistance, but so far failing to clear it. It held under 1.08 and is retreating. Let’s see if price can hold above 1.07. Give it some elbow space. As long as it comes back up within the session, the bullish breakout is still in play. Now, if price climbs back above 1.08, we would have a bullish continuation breakout confirmation. The 1.0890-1.09 area would be the first target.

AUD/NZD 1H Chart 6/1
audnzd 1h chart 6/1
(click to enlarge)

The 1H chart shows the bullish attempt thwarted under 1.08. Now, the RSI is still holding above 40, which indicates maintenance of the bullish momentum. Also, if price can stay above 1.07, it would hold  above the 100-hour SMA, and essentially avoid falling back below the cluster of SMAs. Now, a break below 1.0675 would likely indicate a failed bullish breakout and put pressure back to the 1.0580 low.

AUD/NZD Daily Chart 6/1
audnzd daily chart 6/1
(click to enlarge)

The daily chart shows a market that has made a bullish reversal in April through May. In the short-term, if price can climb back above 1.08, we would have the 1.0918 then the 1.0976 pivots in sight.

Now, we mentioned briefly about the failed bullish attempt scenario, which would maintain a bearish outlook in the short-term. A bearish outlook in the short-term would still be in the context of a medium-term bullish outlook. Therefore, we should limit that bearish outlook to the 1.04-1.0450 area, where the 100- and 50-day SMAs should provide support, especially if the RSI is back around 40.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.