AUD/NZD: Potential Short Opportunity: False Resistance Breakout
The AUD/NZD pair is currently exhibiting signs of a false breakout at the resistance level of 1.1145, subsequently forming a rejection Pinbar, which indicates that sellers may be regaining control in the short term.
What is a False Breakout?
A false breakout occurs when the price briefly exceeds a key support or resistance level, only to swiftly reverse and return to the opposite side. In this instance, the price momentarily broke above the 1.1145 resistance, yet the insufficient buying pressure led to an immediate rejection. This behaviour suggests that sellers were poised above this level, ready to enter the market. False breakouts can often result from market manipulation, where institutions and major players seek to trigger stop-loss orders from traders positioned near support and resistance levels. By instigating an initial breakout, they create liquidity for large contrarian positions.
Reversal Signal
A false breakout, particularly when accompanied by candlestick formations like the Pinbar, often indicates a potential trend reversal. In this case, the failed breakout signifies that buyers who attempted to sustain the move upwards were unsuccessful.
Current Scenario: Has the False Breakout Been Confirmed?
The 1.1145 level represents the highest price since 2022, establishing it as a significant resistance zone. The initial breakout above this level was swiftly followed by a strong rejection, illustrated by the long wick at the top of the Pinbar candlestick. This pattern underscores the weakness among buyers and suggests renewed strength among sellers.
Possible Short Opportunity
If the price breaks below 1.1090, we may expect a more substantial downward movement over the following days.
First Target: 1.0880
This target corresponds to a notable support zone, aligning with previous lows and the projection of the rising trend line established since February.
Final Target: 1.0780
This represents a significant area, marking an important horizontal support level observed over recent months.
Stop Loss:
A suitable stop loss could be placed above the Pinbar high at around 1.1180 to protect against an unexpected reversal.
Alternative Scenario: Resistance Broken
The recent sequence of green candles with elongated bodies and minimal upper shadows suggests a potential alternative scenario, wherein there may be sufficient buying pressure to breach the resistance level in the coming days.
A buying opportunity could materialise if the price breaks above 1.1200.
Next Targets:
In the event of a breakout, the first target could be around 1.1300, with a final target at 1.1450, where the AUD/NZD would encounter significant resistance on the weekly chart.
The AUD/NZD pair is at a critical technical juncture at 1.1100, indicating a potential false breakout of resistance. It is essential to monitor price action closely in the upcoming sessions. A sustained downward movement, particularly a break below 1.1090, would reinforce the selling pressure, while a breakout above 1.1200 could signal a continuation of the upward trend towards 1.1450.
Disclaimer:
74% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Past performance is not necessarily indicative of future results. The value of investments may fall as well as rise and the investor may not get back the amount initially invested. This content is not intended for nor applicable to residents of the UK.
What is a False Breakout?
A false breakout occurs when the price briefly exceeds a key support or resistance level, only to swiftly reverse and return to the opposite side. In this instance, the price momentarily broke above the 1.1145 resistance, yet the insufficient buying pressure led to an immediate rejection. This behaviour suggests that sellers were poised above this level, ready to enter the market. False breakouts can often result from market manipulation, where institutions and major players seek to trigger stop-loss orders from traders positioned near support and resistance levels. By instigating an initial breakout, they create liquidity for large contrarian positions.
Reversal Signal
A false breakout, particularly when accompanied by candlestick formations like the Pinbar, often indicates a potential trend reversal. In this case, the failed breakout signifies that buyers who attempted to sustain the move upwards were unsuccessful.
Current Scenario: Has the False Breakout Been Confirmed?
The 1.1145 level represents the highest price since 2022, establishing it as a significant resistance zone. The initial breakout above this level was swiftly followed by a strong rejection, illustrated by the long wick at the top of the Pinbar candlestick. This pattern underscores the weakness among buyers and suggests renewed strength among sellers.
Possible Short Opportunity
If the price breaks below 1.1090, we may expect a more substantial downward movement over the following days.
First Target: 1.0880
This target corresponds to a notable support zone, aligning with previous lows and the projection of the rising trend line established since February.
Final Target: 1.0780
This represents a significant area, marking an important horizontal support level observed over recent months.
Stop Loss:
A suitable stop loss could be placed above the Pinbar high at around 1.1180 to protect against an unexpected reversal.
Alternative Scenario: Resistance Broken
The recent sequence of green candles with elongated bodies and minimal upper shadows suggests a potential alternative scenario, wherein there may be sufficient buying pressure to breach the resistance level in the coming days.
A buying opportunity could materialise if the price breaks above 1.1200.
Next Targets:
In the event of a breakout, the first target could be around 1.1300, with a final target at 1.1450, where the AUD/NZD would encounter significant resistance on the weekly chart.
The AUD/NZD pair is at a critical technical juncture at 1.1100, indicating a potential false breakout of resistance. It is essential to monitor price action closely in the upcoming sessions. A sustained downward movement, particularly a break below 1.1090, would reinforce the selling pressure, while a breakout above 1.1200 could signal a continuation of the upward trend towards 1.1450.
Disclaimer:
74% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Past performance is not necessarily indicative of future results. The value of investments may fall as well as rise and the investor may not get back the amount initially invested. This content is not intended for nor applicable to residents of the UK.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.