AUDNZD False Break Low?
In previous reports on the AUDNZD, I have stated that the longer term technicals appear bullish. Hence I have been looking for an opportunity to enter into long positions on this recent pullback. There was an aborted attempt around a month ago but there now appears another opportunity arising. Let's take a look at it using the daily chart.
I have drawn Fibonacci retracement levels of the upleg from the January 2014 low to recent June 2014 high. We can see that price came down a couple of days ago for a virtual direct hit on the 76.4% level which stands at 1.0618. This can be seen in the highlighted green circle
This low was also a marginal break of the May low of 1.0647 and with no follow through to the downside so far this low is shaping up as a false break low. False breaks are my favourite bottoming (and topping) pattern as I like to see the sellers flushed out. Stops would have been building below the May low so now that they have been taken out the coast is clear, so to speak. However, in this case we have a marginal break of not only the May low but the lower uptrend channel as well. A double false break shall we say?
I have also added a Relative Strength Indicator (RSI) and it can be seen that each of the last three lows is accompanied by a less weak RSI reading. So it appears we have a triple bullish divergence and it is generally after the third low with higher RSI reading that we can expect a significant move higher.
So it appears that conditions are ripe for a turn here. If this pans out as suggested then we can look further out in time in the next report.