The AUDNZD has corrected over the past few trading weeks as visible in this D1 chart. This currency pair has formed a narrow falling wedge formation which makes a breakout very likely. The descending resistance level is enforced by its declining 50 DMA and should the AUDNZD successfully complete a breakout the path would be clear to rally into its descending 200 DMA.
MACD has confirmed the contraction of the AUDNZD, but formed a positive divergence which suggests a pending trend reversal. We expect MACD to complete a bullish centerline crossover during its breakout rally. RSI is trading in and out of oversold territory which indicates a buildup in bullish pressures while it also has formed a positive divergence and further supports the pending trend reversal.
We recommend a long position at 1.1825 with a potential second entry level at 1.1700. We also recommend a stop sell order at 1.1750 in order to hedge the initial long position and before adding new long positions.
Traders who wish to exit this trade at a loss are advised to place their stop loss level at 1.1700. We will not use a stop loss order and will execute this trade as recommended. Place your take profit level at 1.1925.
Here are the reasons why we call the AUDNZD currency pair higher
- AUDNZD has formed a narrow falling wedge formation and currently trades at support
- MACD has formed a positive divergence which suggests a pending trend reversal
- RSI has formed a positive divergence as well and further confirms a pending trend reversal
- Profit taking which will initiate a short covering rally
- New institutional long positions at very strong support levels