After a strong reversal to the upside on August 5th, AUD/NZD continues to slowly drift higher, while trading inside a possible rising wedge formation. The pattern is not the clearest one, but we will keep a close eye on it for now. According to textbooks, such formations tend to break to the downside, but until we see a clear break through the lower side of it, we will remain cautiously bullish for now and aim a bit higher.
If AUD/NZD slides a bit more but fails to drop below the lower side of the above-mentioned rising wedge pattern, this could attract the buyers back into the game, who could help lift the rate again. We will once more target areas near the 1.0675 and the 1.0694 levels, marked by today’s intraday high and Friday’s high respectively. If the buying continues and the pair pushes through the 1.0694 barrier, this would confirm a forthcoming higher high and AUD/NZD might eventually test the upper side of the wedge, near the 1.0715 zone, marked by the high of April 18th.
In order to shift our view to the downside, we need to see a clear break of the lower side of the wedge and a rate-drop below the 1.0628 hurdle, which is an intraday swing low of August 29th. This way the bulls might get spooked and the bears could take full control and drive the pair towards the 1.0600 zone, a break of which may send AUD/NZD to the 1.0568 obstacle, marked by an intraday swing low of August 23rd. The rate may rebound back up a bit, but if there is still not enough buying activity then, the pair might reverse back down and fall below the 1.0568 hurdle. The bears could then be aiming for the 1.0540 level, marked by near the low of August 25th.
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