By: Mike Kulej
In the aftermath of the earthquake, which hit New Zealand few weeks ago, that nation’s currency fell into a disfavor. It lost ground in relation to most other currencies, and the Australian Dollar in particular. This pair reached a high 1.3790, the highest level in more than a decade.
In fact, the last time the AUD-NZD was that high, it was in early 1990’s, so the current rally has been quite dramatic. During the last up swing, the price advanced a 1000 pips in just over a month, which is a lot for this pair, and settled into a pause.
Rising Flag
Now this price action is starting to make an appearance of a flag. Flags are typically continuation patterns, which simply mark a break in a prevailing trend. The shorter they last, the higher the probability for the resumption of the trend, rather than a reversal.
In a case of the AUD-NZD, the flag suggests that the bullish trend will continue. The sooner, the move comes, the better. Preferably, it should be accompanied by an uptick in the ADX indicator and a higher MACD reading, which could be used as a confirming factor.