AUD/NZD about to stage a rally?
Fawad Razaqzada December 6, 2016 1:31 PM
The AUD/NZD could be about to turn decisively higher. Last night’s RBA policy statement was as neutral as it could get. More to the point, there were no hints of further interest rate cuts. In contrast, the RBNZ suggested at its last policy statement that more rate cuts could be on the way. This alone makes me think that the AUD/NZD may have bottomed out.
Tonight’s focus will be on two events. First, RBNZ’s Governor Graeme Wheeler, who will be testifying before the Finance Select Committee, in Wellington, at 22:00 GMT. Second, on Australia’s third quarter GDP data at 12:30 GMT. Any dovish comments from Wheeler or a stronger Aussie GDP print (compared to +0.2% expected) should, in theory, help to underpin the AUD/NZD.
From a technical perspective, a quick glance at the daily chart of the AUD/NZD would not reveal much. Throw in a few trend lines and a couple of moving averages and … you’d still struggle to come up with any firm conclusions. Yes, the AUD/NZD is in consolidation mode. HOWEVER, the recent false break down below the 1.03 handle makes me think that a bottom may have already been formed.
Since that ‘fake out’ in September, the AUD/NZD moved relatively sharply higher – suggesting there may have been institutional buying interest behind that move – but it then failed to get out of its range. It has since pulled back noticeably. That failure to break out probably had many people believe that it created a double top reversal pattern. While that could well be the case, I have a suspicion that the apparent bearish pattern is a ploy to trap the sellers. If my view is correct then the area between the 61.8 and 78.6 per cent Fibonacci retracement levels is where the next impulsive up leg should begin – if price retraces deeper than here, then one can conclude that the buyers are not in control.
Now the AUD/NZD has dipped into this Fibonacci support area a few times already and so far the buyers have held their ground. They now need to see a sharp move higher and the breakdown of a few resistance levels, starting with 1.0535 and 1.0600. If seen, the AUD/NZD could then push higher to take out liquidity (resting buy stops) above the 1.0740-70 range, before potentially going further higher. Conversely, if it is the sellers who are in control then price will need to confirm this by breaking below the 1.03 handle again.
Source: eSignal and FOREX.com.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.