Ahead of what should prove to be a volatile Asian trading session for the Aussie, we wanted to check in on the currency’s performance against its antipodean neighbor, the Kiwi. As my colleague Chris Tedder noted last week, the AUD/NZD is pressing against a key bullish trend line dating back to March of last year. This trend line converges with the 100-day moving average around 1.0800, presenting a particularly strong area of possible resistance. That being said, some other technical factors increase the likelihood of a bullish breakout later this week or early next week.
For one, the pair has rallied within a short-term channel over the last 3 weeks. With rates currently in the lower half of the channel, either the longer-term trend line or the short-term channel will fail by the end of the week. The RSI confirms the bullish channel and should lead, or at least confirm, the next move in price. Another significant signal comes from the RSI: the indicator formed a triple bearish divergence with price over the last four months, suggesting that the AUD/NZD may have carved out a longer-term bottom around the 1.0500 area.
For now though, bullish readers may want to consider exercising a bit of patience. If we see a conclusive break above the converging trend line / 100-day MA resistance at 1.0800, a move up toward the longer-term 38.2% Fibonacci retracement at 1.0900 would be favored, with a rally through that key barrier potentially opening the door for a run to 1.10, 1.11, or beyond. Meanwhile, a drop though the near-term bullish channel would shift the near-term bias to the downside for a dip back toward 1.0700 or previous support in the mid-1.0600s.
Key Economic Data / Events That May Impact AUD/NZD This Week (all times GMT):
Wednesday: Business NZ Manufacturing Index (22:30)
Thursday: AU Inflation Expectations (1:00), AU Employment Report (1:30), Chinese Trade Balance (TBD)
Friday: Chinese CPI and PPI (1:30)