AUDNZD recently broke below the ascending channel support on its 4-hour time frame to signal that a reversal is underway. Before that happens though, price could still make a pullback to the broken support. However, the 100 SMA is still above the longer-term 200 SMA to indicate that the path of least resistance is to the upside or that there’s a chance the uptrend might resume.
Applying the Fibonacci retracement tool on the latest swing high and low shows that the broken support lines up with the 61.8% level around the 1.1000 major psychological level. Stochastic is pointing up to show that buyers are in control for now until the oscillator hits overbought levels and turns back down.
The New Zealand elections held over the weekend resulted to a victory for the National Party but not enough for them to take majority. This means that politics will be in limbo for a bit longer as the country waits for a coalition to be formed.
Another potential event risk for the Kiwi is the upcoming RBNZ decision. Even though no actual interest rate changes are expected, traders appear to be pricing in a less upbeat statement from the central bank since jobs growth recently disappointed. Kiwi strength could also be one of the issues pointed out and more jawboning could keep a cap on the currency’s gains.
There are no major catalysts lined up for the Aussie, which indicates that it might simply act as a counter currency in the next few days or be more sensitive to price action of gold and iron ore. Market sentiment could also push these higher-yielding currencies around.
By Kate Curtis from Trader’s Way