The currency pair AUDNZD in August last year established a maximum at the level of 1.1042 and since then has been moving in a downward channel to reach in November 1.0415.
- Australian dollar getting stronger
- the bearish engulfing may signal a correction
In mid-December the price broke out of the aforementioned channel and the pair is systematically making up for the losses of the previous few months. Undoubtedly, the strengthening of the Australian dollar is due to the high prices for iron ore – one of the main commodities, which has a share of nearly 20% in exports. The main buyer of Australian ore is China.
Yesterday, on the H4 chart an interesting formation appeared – a bearish outside bar. The next four-hour candle easily broke out from this pattern to the downside.
Often the bearish engulfing is a signal for a decline, especially if it occurs in an uptrend, and we have been dealing with such a trend since the beginning of December.
On the H4 chart I marked this formation with a red rectangle, its range is 1.0840-1.0815.
In addition, we can draw a local upward trend line. When planning to open a sell order we must take into account that we are playing against the trend, so it is advisable to wait for a confirmed defeat of the mentioned trend line. Only after defeat of the line it may give a verified signal for declines, especially that the MACD is also in a downward phase.
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