AUD NZD - 200 PIPS BEARSIH OR 150 PIPS BULLISH?
Consolidation has been the name of the game in the Currency Market for most of 2014 and the AUD NZD has faithfully played its role in this regard. A large 300- Pip Pennant can now be seen following a nearly 3-year downtrend that started in 2011. Within the next few days, we will see either a continuation of this pattern with a Bearish break down to Support or a Bullish move that starts a new Uptrend towards the major Outer Downtrend Line.
The strong decline in the AUD NZD started from the high of 1,3794 in March 2011 to eventually end at the low of 1,0491 in January 2014. In the process, it created an Inner and Outer Trend Line as the market accelerated in the latter part of the downtrend before ending with the current Pennant formation.
This Pennant can be seen more closely on the next chart where a small Range has also been formed at the Resistance.
At this point, the currency pair could continue to move within the boundaries of the Pennant. This would require a break of this small Range to start the downtrend that carries us to the Support area at 1,0662.
The move could take approximately 6 to 10 days and offer traders between 100-250 Pips in gains. Given that it would start with a break of a small Consolidation, however, the trend could actually move very quickly, reaching that Support target in only 3-4 days.
In the Bullish scenario, a breakout above the Resistance of the Range would start a strong breakout that sees the Aussie rally a few hundred pips heading into September.
The first target to be hit would be the Weekly Range (WR) followed by the Breakout Equivalent (BE) of the Range. This rally could also take fewer than 6 days to hit those price points and give the trader close to 150 Pips in gains. Following this stage, the market is likely to pause once more before continuing much higher to the larger target of the Outer Downtrend Line of the previous trend.
Breaks of Inner Trend Lines usually lead to moves towards Outer Trend Lines as long as the setups to start these trends are strong enough. Given the size of the current Pennant Consolidation formed over an 8-Month period, it would only be a matter of time before that Outer Downtrend Line is hit.
Bullish or Bearish, stay sharp and patient fellow traders and large profits will be yours once more.
RECENT EMAIL FROM CLIENT