The AUD/NZD Analysis (per mid-June 2014)

First let's look at the big picture - the monthly chart. The pair AUD/NZD seems to have found strong support at the prior lows of the years 2004-2005 (see the lower grey dashed horizontal line), which is just above 1.05. It's still within a big down trend though - it's well below the bear trend line and it hasn't even retraced by 23.6%. Neither has it risen to the upper border of the 2004-2005 range (the upper grey horizontal line). So at this point the question you might ask is: Is the bear trend so strong or has the correction only started to develop?

Now that we know that price is sitting at a strong support level, let's look at this down trend in more detail. For that purpose let's use an Andrews Median Line Set - the basic fork. We observe that the ongoing correction abruptly ended on the Median Line. It's a very common occurrence - price tends to respect the median line upon approaching it both from above and below. However, previously this very Median Line once acted as sloped support (price bounced off it Sep. 2011) then as a sloped balance line (price oscillated around it in Sep. 2013). Now it's acting as resistance. We can also see that price broke out of the downward channel, which means that current correction is more serious than the previous one and the down trend has taken a pause.

Switching to the daily time frame, we can see that there's a horizontal support at the lows at 1.053 and a switch-back kind of resistance (coming off the prior lows) at 1.12. We also notice a horizontal multipivot line at 1.091.

We can also notice that one swing high has been taken and that there have been no new lows since Jan. 2014. This behaviour can be best encompassed with a Schiff Median Line Set (pink). Price has found resistance at the upper MLH ('H' stands for parallel) and at least a temporary support at the median line. It's also got a blue horizontal S/R line that may act as a magnet on price.

Taking a closer look we notice that price has been following the blue Median Line Set, hit the Median Line twice and then sharply declined. The selling force was so strong and vehement that price failed to find support at the lower MLH, broke through it and stopped falling well below it. This overshoot doesn't mean though that this blue pitchfork and its derivative slope aren't working. On the contrary, we expect price to continue following it, be it to the lower MLH or even higher - back within the fork. The added sliding parallel at the low may be breached once or twice, but we'll draw an extra parallel as long as price doesn't close for good below the current low (which is at 1.0812).

Upon our further observation we can see that price has also found support at the half-way level of the up trend which is also an argument for the up trend's continuation.

However, another close-up reveals an important piece of information - on an hourly chart we can see that price is trending down, following a down fork (red). On the other hand, that market is actually in the process of correction - it's not making further advancements in terms of the slope of the red fork, but keeps approaching the red median line.

Now we're at a point, where we can get little new information. We can see higher highs and higher lows. But they're no big deal - corrective in nature and making little progress above each other. Hasn't it found resistance at an internal parallel? Yes, it has, but it has also found at least a temporary support at the red lower MLH. So is it going to find resistance at the red median line, if it zoomed through it last time? Maybe it won't and it will go down or it will zoom through it again to find resistance at the blue horizontal line. We don't know it yet. 

What we know is that:
1) we are above the long-term support,
2) we are in a long-term bear trend, which is in the process of a substanstial correction,
3) the long-term accelerating corrective process was met with resistance and gave in,
4) the sell-off was overreactive in nature, so it marked a low that couldn't be matched during the next three swings down.

Thus both the strength of the long-term correction (to the up side) and the news-driven sell-off (to the down side) provide evidence in favour of some kind of return to balance, which having weighed-in all of the above, speak for a return to the red down sloping ML or the horizontal blue multipivot line.

13th June, 2014, 14:00 GMT.

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Disclaimer:

There is a very high degree of risk involved in trading forex. I assume no responsibility or liability for any trading or investment results. My posted statements and charts may unintentionally include inaccuracies. All content posted is for educational purposes only and is not a financial advice. The presented set-ups are not solicitations of any order to buy or sell. Rather, you should use the information only as a starting point for doing additional independent research, your own due diligence, in order to allow you to form your own opinion regarding trading decisions. No assumption should be made in relation to the performance or accuracy of the methods shown. No claims are made as to the success or profitability of any of my posts.