AUD/NZD price analysis: bullish outside day offers an upward bias
AUD/NZD price analysis: with a bullish outside day posted, we look for the next corrective leg higher
Market highlights from the past week
Tuesday, July 7: overall risk appetite remained fragile on Wednesday and there was unease over domestic coronavirus developments as the New South Wales-Victoria border was closed.
Wednesday, July 8: precious metals posted further gains on dollar weakness, with gold posting fresh eight-year highs.
Thursday, July 9: the fragile risk tone undermined support on Friday with WTI just below $39.0 p/b and Brent around $41.70 p/b.
Friday, July 10: oil prices secured net gains on Friday before a retreat on Monday as Opec considered reversing some of the emergency output cuts.
Monday, July 13: precious metals initially made further gains with silver at 10-month highs before a correction as the dollar recovered some ground.
AUD/NZD price analysis
Let us have a look at the technical viewpoint:
Monthly: traded to a multiyear low of 0.9991 in March. April and May posted net gains with July price action leaving an indecisive doji-style candle at the high.
Weekly: previous resistance located at 1.0865. Selling from 1.0881 resulted in all the initial weekly gains being sold into. Mixed trading for the past seven weeks. The previous swing low is located at 1.0188 (week of December 31, 2018). With this being close to the 78.6 per cent pullback level of 1.0181 (from 0.9991-1.0881), we look for this to be a substantial medium-term support area.
Daily: five-waves up should dictate that we are now in the choppy and corrective formation lower (Elliott wave). Levels close to the 38.2 per cent Fibonacci of 1.0540 (from 0.9991-1.0881) found buyers. We posted a bullish outside day yesterday. This formation is often seen at the base of a trend and the start of a new upward bias.
What is your sentiment on AUD/NZD?
Intraday four-hour: intraday sentiment is at overbought extremes. There is scope for a mild selloff to buy into. Previous swing low is located at 1.0606
Outlook: with a bullish outside day posted, we look for the next corrective leg higher.
Possible trade setup:
Action: buying at 1.0606 (swing low)
Stop: 1.0556 (below the bullish outside day)
Target: 1.0820 (below the previous swing high)
Potential return on risk to first target: R4.2 (reward 214 / risk 50)
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