Technical Sentiment: Bullish
- New Zealand GDP rose only 1.0% in the first quarter, less than the expected 1.2%;
- AUD/NZD offered a perfect bounce from the support cluster;
- Traders will now target resistance levels all the way up to 1.0940.
Despite posting 1% GDP increase on Wednesday, the New Zealand Dollar couldn’t overturn the recent uptrend. Two days later, as price is increasingly stable above the support cluster, buyers are returning for another bullish rally.
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At the end of the European session AUD/NZD was trading just above 1.0800 as selling pressure is beginning to dissipate. Due to the bounce off the 1.0740 cluster (formed around an old pivot zone, 61.8% Fibonacci retracement and a support trendline), the bullish swing configuration remains intact and opens the way to further gains next week.
Stochastic remains in oversold territory on the Daily chart, but it is beginning to signal a reversal. If price remains stable above 1.0800 in the coming sessions, the current Low will soon be confirmed.
Towards the upside AUD/NZD will encounter several resistance lines. The nearest resistance is marked by the 50-Day Moving Average, currently priced at 1.0841. Next there are two resistance levels from April and early May, located at 1.0870 and 1.0909. If price doesn’t reject from these resistance levels, the 200-Day Moving Average will surely provide enough resistance to put a temporary break in front of the buyers.
The bullish bias remains valid only as long as AUD/NZD does not invalidate the current low at 1.0740. A break below this support will trigger an avalanche of stop losses, leading to a complete break-down towards 1.0643 and 1.0500 area.
Prepared by Alex Z., Chief Currency Strategist at Capital Trust Markets