Will AUD/NZD Plummet in Days, Weeks to Come?

Last updated 6/12/2009 2:03 PM EST (GMT -5) 0 Comments - Add your comment

FX360 Technical Analyst Staff

Technical Analyst, GFT

The AUD/NZD is poised to fall off a cliff based on a nearly complete shooting star formation based on weekly price action. The shooting star formation is a relatively common candlestick pattern that oftentimes signals a bearish reversal may be underway especially when the candlestick tops out near Fibonacci resistance as we see here. Bulls have been unable to break through last July's all-time AUD/NZD high of 1.2969 having retested this level several times late-February of 2009. Most recently, prices hit a mid-week high of 1.2837 right around 78.6% resistance, and if we see a close near current intraday lows (approx 1.2360) we will then have an officially complete shooting star formation.

Extra bearish confirmation may come on Sunday's open should we see a gap to the downside on the open in which case we may see a brief rally as prices fill that gap before plummeting. If this does occur, an ideal selling opportunity would be to wait for a bearish geometric pattern to emerge and short near pattern completion in order to help minimize the risk (thus improving risk/reward). So we'll keep an eye on shorter time frames (30mins, for example) after Sunday's open if prices do in fact gap lower on the open for these bearish patterns to develop. This may also help to avoid a potential whipsaw because if prices manage to rally above this week's high (top of shooting start) then we may see an equally strong longer-term rally (more so if prices rally above the all-time high, obviously).

Keep in mind this analysis is based off a weekly chart so this hypothetical drop may take several weeks to complete. That said targets to the downside sit just above the 61.8% and 78.6% retracements of the major rally leading into the initial test of the July 2008 all-time high.

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