Today we’ve got a potential setup forming on the AUDNZD weekly chart. What we’re seeing here is the testing of a multi-year rising trendline. With price currently at this area of support we can assume one of two things will occur; 1 – Support will hold and price will bounce off our trendline, or 2 – Support won’t hold and price will continue it’s medium-term downward momentum.
If we consider the horizontal multi-year resistance line above, we can see that price has been range bound in between these two lines for close to four years. These two trendlines also form the makings of an ascending triangle which in the long term could result in a significant trend reversal.
There are a few ways to potentially play this current setup:
- A trader could look to buy a rejection of our rising support trend line with quite favourable risk-reward;
- A trader could look for a confirmed break through support and short; or,
- We could sit on the sidelines and see if our ascending triangle forms and buy the breakout of the confirmed pattern
Having been in a multi-year downtrend, this pattern could potentially indicate a bottom and personally I favour the long side purely because the risk-reward is appealing to me.