AUD/NZD – Updated Long-Term Outlook

Dear Traders,

the AUD/NZD showed renewed bullish momentum, which creates an interesting alteration to the medium and long-term outlook. Today’s post will provide an updated wave analysis for this currency pair.

All Roads Lead Upwards

The AUD/NZD finds itself in a longer-term sideways correction as part of a large wave B, which is probably approaching its final stages.

I highlighted the potential for a triangle formation in the making as the final piece within this large correction in my previous analyses of this pair. However the recent bullish spike above the high of May 25 is the first evidence that makes this scenario less likely, although not impossible. There are two main alternatives that I currently consider more likely:

• Scenario 1 (black price lines): a flat could be forming as the final purple wave Y. The fact that bullish momentum reignited over the last couple of weeks suggests that a retest of the upper range resistance around 1.13 could be on the cards, which would form wave b (blue) of the flat within purple Y. This should then be followed by a sharp but final reversal back towards the bottom of the range around 1.04 to 1.03 before the way would be clear for the AUD/NZD to head for a clear bullish break of the long-term range. Both price turns within this potential flat could provide excellent trade opportunities, and will be highlighted if and when they come to pass.
• Scenario 2 (white price lines): There is a chance that the long-term wave B (green) ended already at the Sep 2016 low and that all price action since then is forming a very large expanding leading diagonal. It has very similar implication to the first scenario in that further bullish momentum should be building over the coming trading weeks, except that price would rise quite a bit higher ( towards 1.15 – 1.16) before the diagonal completes, and enters into a fairly strong bearish correction during a large scale wave 2. I assign lower odds to this idea because expanding diagonals are more rare and the diagonal would potentially be quite disproportional to the previous wave 1/A (green).

In any case, bulls should remain in control for the time being until price reaches levels close to 1.12 – 1.1280. Longer-term positioning would probably benefit the most from further patience until the pattern becomes more confirmed. Short-term entries should only be considered to the upside until 1.12 or thereabouts is reached.

All the best along your trading journey.

Hubert

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