Bottom Formation in AUD/NZD

By: Mike Kulej

The longer-term chart of the AUD/NZD in a process of forming a bottom chart pattern. For the better part of 2010, the AUD has been falling in relation to the NZD, from the high of 1.3230, all the way down 1.2090. Since then, the exchange rate rebounded, a process that was accelerated by worse than expected employment data in New Zealand last week.

This recent move from 1.2090 to almost 1.2600 gives the daily chart of this a pair an appearance a large rounded bottom. Over last two trading days, the AUD/NZD ran into a strong resistance, which corresponds with the previous minor high of about 1.2600. At the same time, the daily candlesticks formed a tweezers top, including a shooting star. This suggests a pull back from the 1.2600 resistance level.

As it happens, a pullback here is consistent with a development of an important rounded bottom, perhaps becoming a cup with a handle. From here, the price could drop to one of the Fibonacci levels, before resuming the uptrend. Eventual breakout above the 1.2600 resistance would complete this bottom formation, setting the AUD/NZD on a next, strong bullish run.