Trade Recommendation: Gold/NZD

The Gold/New Zealand Dollar pair (XAU/NZD) lost all bullishness in October 2012 when it posted a lower high of 2,193.494. The pair then took a turn for the worse as it broke support of 1,900 in April 2013. This triggered the rounding top reversal pattern on the monthly chart.

The breakout ignited a selling frenzy that drove the pair to as low as 1,439.25 in December 2013 (A-wave). In a little over a year, Gold lost almost 35% of its value against the New Zealand Dollar.

At this price level, bulls began to emerge. They protected the 1,460 support until December 2014. With a solid base established, the market began to rally. It went as high as 1,944.854 in June 2016 (B-wave). While bears managed to defend the 1,900 resistance, bulls responded by generating a higher low at 1,594.445 in December 2016 (C-wave).

With a higher low in place, the pair rallied to 1,904.098 in November 2017 (D-wave). The pair has been pulling back since. This could be your opportunity to buy the next higher low.

Technical analysis show that the Gold/New Zealand Dollar pair is creating an ascending triangle pattern. It appears to be at the early stages of an E-wave down. We have several reasons to support this view.

First, we can see that the market retested the 1,900 resistance in May 2018. This serves as a confirmation that bears still control that price level. In addition, the 9-day and 21-day moving averages are detached from the monthly candle. This suggests a potential move down.

The strategy is to buy the dip as close to 1,800 as possible. If bulls stay above this level, they will gather the momentum required to break out of the formation and move to our target of 2,300.

The process may take more than six months.

Monthly Chart of Gold/New Zealand Dollar on OANDA

As of this writing, the Gold/New Zealand Dollar pair (XAU/NZD) is trading at 1,848.413 on OANDA.

Summary of Strategy

Buy: As close to 1,800 as possible.

Target: 2,300

Stop: 1,760

 

Featured image courtesy of Shutterstock.

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.