AUD/NZD Head and Shoulders Forex Market Signal – May 2, 2014

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AUD/NZD Head and Shoulders Forex Market Signal - May 2, 2014

AUD/NZD Head and Shoulders Forex Market Signal - May 2, 2014

On its 1-hour forex time frame, the wave pattern on AUD/NZD shows that a forex market signal is indicating a reversal. A head and shoulders pattern has formed, suggesting that the previous uptrend waves are already exhausted and that a downtrend is about to take place.

Price action shows that the forex market signal is already in a corrective wave, as the price has already broken below the neckline of the formation near the 1.0750 minor psychological level. The pair did make a quick pullback today though when New Zealand printed weak commodity price data and Australia had a stronger than expected quarterly PPI report.

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Forex Market Signal on AUD/NZD

Bear in mind that, on the longer-term time frames, AUD/NZD has just come off a test of resistance at the 1.0900 major psychological handle. This was followed by a falling trend line break on shorter-term time frames then a retest. From there, a head and shoulders forex market signal on a possible trend reversal was evident.

With that, price could head to the bottom of the longer-term range around the 1.0550 minor psychological support, as visible on the 4-hour chart. Take note that the head and shoulders formation is roughly 150 pips in height, which suggests that the next selloff could be off the same size. In this case, there’s a downside potential until the 1.0600 mark.

On the other hand, a stronger rally could take the pair back up to the top of the range at 1.0900. Since there are no major reports from both Australia and New Zealand though, the ceiling might still hold in the near term and push the pair back down. The major report lined up for today is the NFP and this might have an impact on overall market sentiment, affecting most forex market signal patterns.

To contact the reporter of the story: Marco Roemer at marco@forexminute.com

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Samuel Rae is an active retail trader across a variety of assets, including currencies, stocks and commodities and the author of Diary of a Currency Trader (Harriman House). His personal strategy focuses primarily on classical technical charting patterns with a fundamentally supportive bias, combined with a strict, risk management-driven approach to entries and exits. He is an Economics graduate from Manchester University, UK.