As the weekly chart below shows, the Aussie is testing long term trend line support against the Kiwi.
Often, trendlines like this produce small false breaks to the downside which makes the set up on the daily chart look like one for the watch list.
The major move from the high at 1.3797 looks like a potential 5 swing structure. In these circumstances the end of the 5th swing often represents the beginning of a significant counter trend rally or reversal.
The chart below shows a cluster of Fibonacci projections of the potential length of the 5th swing (beginning from”4″). These projections are:
- 38.2% of X to 3 (blue)
- 100% of X to 1 ( black)
- 127% of 3 to 4 ( green)
If price falls to and then rejects the Fib projection zone by making a trough there, this would represent a buy set up using a 5 swing reversal strategy.
A rejection of this area would also look like a false break of the trend line support that could have the shorts scrabbling for cover. It would also be starting from an area that has the stochastic oscillator oversold on both the weekly and daily charts which allows plenty of upside scope