Technical Sentiment: Bearish
Key Takeaways
• AUD/NZD remains capped at 1.0909 ahead of RBNZ this week;
• A break above the resistance is required for the long term uptrend to be validated;
• A pull back below 1.0830 and lower favors the Kiwi.
The last two months has seen Aussie rally higher against the Kiwi, from 1.0535 to 1.0909, pushing for a reversal of the long term downtrend. With a higher swing low in March, the trend will switch to bullish if AUD/NZD completes a higher swing high above 1.0909 – 1.0941. The strategic consolidation ahead of RBZN this week – with expectations that interest rates will be increased from 2.75% to 3.00% – will shape the landscape for weeks to come, depending on which direction the pair finally breaks.
Technical Analysis
As traders are anxiously waiting for the Reserve Bank of New Zealand’s interest decision on Wednesday, Aussie bulls met strong opposition for the third time since last week when reaching 1.0909. This resistance line was also respected back in December 2013 and February 2014; with 38.2% Fibonacci Retracement level (from 1.1576 down to 1.0488) further increasing the resistance confluence.
With a higher swing high in March, AUD/NZD appeared set to break the long term downtrend and establish a higher high above 1.0909 – 1.0941, towards 1.1078 – the 200-Day Moving Average on the Daily chart. The bullish scenario will be placed on hold if AUD/NZD confirms the triple top reversal pattern. A break through the support trendline from March and the 1.0832 price pivot zone will extend downside potential towards the 1.0735 pivot zone (50% Fibonacci retracement and 200 Simple Moving Average on the 4H timeframe). Daily Stochastic is in overbought territory, condition which also suggests a correction is in play.
Resistance levels: 1.0909; 1.0941; 1.1032; 1.1078.
Support levels: 1.0832; 1.0735; 1.0640.
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Prepared by Alexandru Z., Chief Currency Strategist at Capital Trust Markets
