AUDNZD - Top Down

AUDNZD - Top Down

In this Guest Post, DV 34 looks at the long term bullish case for AUDNZD

Happy New Year to you all, hope it has started well…!

Looking at the monthly closes for January 2014, I think there have been some interesting developments and the two main themes that I have been interested in have been the worldwide stock indices and the AUDNZD on a macro level of monthly charts or higher.

I will have another look at the indices in another post and am still very bearish, however in this post I wanted to look at what I think could be a major turning point in the AUDNZD, something that could turn into a long term trade

To disclose, I am long this pair and you will see the logic of why at the end of this article

Let’s start with the big picture again… using a top down approach

AUDNZD Quarterly Chart

AUDNZD Quarterly Chart

The quarterly chart shows two bullish patterns, the Cypher is probably invalid – I am not sure if the large spike was due to a data error, but either way it is not overly relevant now

Nevertheless the bat pattern is my personal favourite pattern and we are stretched in this pair with the MA’s a long way above and price well outside of the 2sd bollinger bands at long term structural support, offering a possible mean reversion trade

The hammer candle shown is not closed so do not take too much notice of it as it will change between now and March 31st

AUDNZD Monthly Chart

Click to Enlarge Click to Enlarge

On the monthly this hammer candle IS closed, if I were a naked trader (using no indicators) I would buy if it broke above the high within the very next bar (February). It is nice to see this on a longer term chart with the bat pattern present

The horizontal blue lines are what I think are key levels, and some of them cluster with long term Fibonacci retracements which suggests they should act as at least temporary resistance and therefore a good take profit zone! (just before… )

Even if this trade works out, it will be one that possibly takes anywhere between 4-12 months to get back to the 61% retracement or even much longer…

AUDNZD Weekly Chart


The weekly chart also has a morning star candlestick pattern, I have looked at morning stars for years and to be fair they do not work overly well at all if traded alone despite what every web site says

(I spent 3 months testing them in FX… so learnt the hard way)

However, when you get one at a major level, depending on how it arrived there can offer clues as to how it will leave the zone, the blue line shows two morning stars where the pattern formed without any prior pause, these patterns tend to be retested to at least the body of the centre candle if not lower and fail

The red arrow shows two morning stars where there was a structure support prior to the morning star, which we currently have; often the market tests the bottom of the structure prior to the morning star and then the rally starts from this point

I have not tested this theory in detail, so it is only my rough observations… verify it first!

AUDNZD Daily Chart

Click to enlarge Click to enlarge

The daily chart shows my initial long entry, it was based on an instant rejection of a flat level breakout shown by the doji + bullish divergence on the MACD.

I have already taken target 1 profit and am looking to buy again slightly lower to build the longer term positional trade with much more ambitious targets due to the bullish higher timeframe analysis

The retracement could easily be deeper than the blue line shown so we will have to see how it develops

All the best,