AUD/NZD Dropping Towards Key Support Ahead Of RBNZ
The AUD/NZD has retreated noticeably in recent weeks. The NZD has been supported by a slight improvement in New Zealand data and thanks to firmer dairy prices, while the AUD has been undermined by slumping metal prices. The Reserve Bank of New Zealand will be making its latest policy decision tonight and the focus of the FX markets will be on the NZD as a result. No change is expected to be announced, however. But the wording of the policy statement could cause the kiwi to move sharply nonetheless. Ahead of the RBNZ policy decision, the NZD is being bought with NZD/USD rallying and AUD/NZD slumping. Clearly, some market participants are expecting to hear hawkish remarks. But will it be a classic “buy the rumour, sell the news” type of a reaction?
If so, it will tie in well with the technicals, for the AUDN/NZD is heading towards a key support area. As can be seen, the cross has left behind at least two untested broken resistance levels at 1.0570 and at 1.0530. Once resistance these levels could turn into support. In addition to these horizontal lines, two Fibonacci levels and point D of an AB=CD price pattern also convergence between 1.0530 and 1.10570. The 61.8% retracement level against last year’s low comes in at 1.0535 while the 127.2% extension level of the swing from point B to C comes in at 1.0565. Furthermore, the 200-day moving average, which is now pointing higher, is coming in at close proximity, around 1.0585.
Given the confluence of all these technical levels, I would be very surprised if we didn’t get a bounce around these levels. But with the recent trend being bearish, the upside may be limited in the short-term to the now broken support area between 1.0645 and 1.0680. But a potential rally above this range would not only end the current bearish bias, it would be very bullish in my view.