A double bottom pattern can clearly be seen on the daily chart of AUD/NZD, indicating that the recent downtrend is coming to an end. The neckline of the formation is around the 1.0900 to 1.0930 levels, although stochastic is indicating that buying pressure is fading.
A quick pullback to regain upward momentum might be in the cards before price makes an attempt to break above the double bottom neckline and confirm that a longer-term uptrend is underway. In this case, the rally might last by as much as 400 pips, which is the same as the height of the chart pattern.
On the other hand, a selloff could last until the previous lows just around the 1.0500 mark. A bounce from this support zone could create another bottom, which is still a valid reversal signal.
Going long above the 1.0950 level could catch the upside break and aiming for at least 300 pips could yield a 3:1 return on risk with a 100-pip stop below the pattern’s neckline.
By Kate Curtis from Trader’s Way