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Short-term trading idea FX AUD/NZD – trading sideways: cross in a narrowing formation

Trading opportunities on the currency pair: A pin bar has formed on the weekly timeframe. Given that the pair has long been trading within a certain range for a while, it might not work out. Pin bars often fail to fully form, so let’s keep an eye on the current bar.

I’m predicting the price will restore to 1.0725 (50% of the drop from 1.0746 to 1.0609) with a subsequent breakout to 1.0550. I’m inclined to say that the pin bar won’t complete its formation. There’s a reasonably strong support at 1.0550. From here, I’m expecting to see a rebound to 1.0868.

Background

The last idea on the AUD/NZD currency pair was published last year on the 31st of October. Back then, the Aussie was trading at 1.0591 NZD. Then, a double top model formed beneath the resistance zone from 1.0744 to 1.0771. Due to this, when 1.0588 was broken, I was expecting to see the rate drop to 1.0479 (161.8%). Sellers hit their target within 4 days. By the 10th of November 2016, the AUD/NZD had slid to 1.0364.

Current situation

So, what’s so interesting about the current situation on the cross? The price on the weekly timeframe is right in the middle of a narrowing formation. The weekly candlestick closed with a pin bar; a bearish body and long wick. The probability of it working out is around 65-70%. If the price exits upwards in the next couple of weeks, there’ll be an increased chance of the Aussie falling to 1.0375.

While the price is trading within a narrowing wedge, you can both buy and sell the Aussie on the generated signals while the price is trading within its current range. If we look at the pair from a mid-term perspective, we need to wait for the price to exit the range. According to the weekly indicators, the scales are tipping in buyers’ favour.

Weekly chart. Source: TradingView

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