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AUDNZD - 240 minute. Bullish Reversal Set Up

CMC Markets

Summary

  • If a trend trough occurs at or very close to any of the 3 Fibonacci clusters shown on this chart there would be a buy set up under the Gartley strategy
  • An initial stop could be placed just behind the trend trough and an initial profit target could be the half way point between B and X

The Aussie rallied strongly against its Antipodean cousin between July and late October but has since fallen pretty sharply. Winning the Bledisloe Cup match in Hong Kong on Saturday (and possibly the RBA rate decision on Tuesday) saw this decline halted temporarily. However, strong jobs figures in NZ today and the Commonwealth Bank's decision to turn the RBA's .25% rate hike into a .45% tightening has the market thinking that interest rate differentials may move in favour of the Kiwi for a while. Consequently this currency pair came in for some decent selling again today.

All this has turned the recent decline into a potential 3 swing or ABC move. This would start to look much more like a correction than the start of a major move lower if price makes a swing low from here (at a point we'll call C)  and then rallies to overlap back through the low at A.

The Gartley strategy seeks to get in early and very close to the end of an ABC correction by projecting Fibonacci cluster levels in advance. If price actually makes a trough at or very close to one of these levels then there is a tradeable probability that this particular trend low will be the point C and so the finish of the whole corrective move

There are 3 cluster levels shown on this chart. The first is at 1.2657/1.2644. The second is at 1.2545/1.2529 and the third is at 1.2400/1.2379

Three types of Fibonacci projection have been used to identify these clusters. The first are retracements of O/X (Red on the chart). The second are ratios of the distance from X to A measured from B (black). The third are ratios of the distance between A and B measured from B (green)

If there is a set up, I'll post some ideas on trading strategy

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Cheers

Ric


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