AUD/NZD – Descending Triangle Forming at Range Support

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AUD/NZD - Descending Triangle Forming at Range Support

The AUD/NZD has been consolidating this week. After starting with a dip to the low on the month at 1.0931, price has rallied back to 1.1020. After that there has been some congestion as we can see in the 1H chart, as the AUD/NZD started to trade in what can be interpreted as a descending triangle.

AUD/NZD 1H Chart 11/20
audnzd1h11202014
(click to enlarge)

The 1H chart shows a bearish market.
1) The 200-, 100-, and 50-hour simple moving averages (SMAs) are sloping down and are in bearish alignment.
2) Price has been holding mostly under all of these traditional SMAs.
3) The RSI has held below 60 since tagging 30, showing maintenance of bearish momentum.

With the prevailing bearish trend intact, a break below 1.0930 should open up a bearish continuation scenario. In fact from the development of this week’s price action, as long as price is held below 1.0975, it appears AUD/NZD is pressured to threaten the 1.0931 low.

We’ll get bet back to this bearish outlook, but first, what if price does break above 1.0975. That would show respect to the current lows in the 1.0930-1.0940 area. It would also open up the triangle’s and week’s high bear 1.1020. Then a break above 1.1020 would shift the bearish outlook to a bullish one. When we take a look at the daily chart, we can see that there would be at least upside risk to 1.1090-1.1115, with a more aggressive outlook towards the 1.13, which represents a multi-month range resistance as well as the 2014-high.

AUD/NZD Daily Chart 11/20
audnzdday11202014
(click to enlarge)

A bearish breakout is not necessarily going to continue the downtrend displayed in the 1h chart, but it will put even more pressure on the mult-month range support see on the daily chart. The range-low since August is in the 1.0910-1.0920 area and is reinforced by the 200-day SMA. If price falls below 1.0930, we should anticipate buyers at and above the 1.09 handle (giving some elbow space to the current multi-month range low.

Bullish Target: We can also see why a bullish outlook from this point targets the 1.1090-1.1115 area – this is the central pivot area, and can be interpreted as the “fair price” from August to now. However, with the mode in 2014 slightly bullish, don’t be surprised if price does push above 1.1115 to test the 1.13 high.

Only a break below 1.09 should open up a bearish outlook, which opens up the low on the year around 1.05.

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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.