The daily candle chart below shows AUDNZD descending a less bearish channel (point 1 on chart) and then exiting into a converging steeper bearish channel (point 6) after following a serious of short term steep bearish continuations (point 4) such as the current one providing bearish resistance as it repeatedly tested a long term bearish support line (point 2) –which has just failed -in yesterdays session.
Support was found further below – near the low of yesterday’s trading session – on a medium term bearish support line (point 5) which AUDNZD has tested through in today session and near lows for the day (near 1.1407 as of publication) and making fresh multi-year lows. The trend overall and many of the continuation lines where discussed in a previous article on the pair in early July 2013.
Unless the pair can regain the long term bearish support line (point 2) which may now act as resistance or at least the medium term bearish resistance (point 5) which is also failing, AUDNZD may continue its bearish momentum overall, and within the very short term (point 4).
The next target could be the upper line of a bearish pitchfork channel (point 3) with a potential very short term bullish bounce such as those observed in recent history (point 7) and with long term bullish support further below near 1.1000 (additional zoomed-out chart provided below for comparison).
Below are examples of how to trade a bearish continuation or a bullish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 1.1437 with a Limit to take profit @ 1.1520 and a stop-loss @ 1.1388 Risk/Reward Summary: Limit risk = +83 pips profit / (-49) Stop-loss risk = Gain to Loss ratio = 1.69
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 1.1390 with a Limit to take profit @ 1.341 and a stop-loss @ 1.1433 Risk/Reward Summary: Limit risk = +49 pips profit / (-43) Stop-loss risk = Gain to Loss Ratio = 1.14