AUD/NZD Confirms a Bearish Breakout with Historic Low in Sight

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AUD/NZD Confirms a Bearish Breakout with Historic Low in Sight

The AUD/NZD has been bullish for most of January, rallying from its historic low of 1.0353 to 1.0795 before retreating at the end of the month. After the first week in February, we saw the pair break below the previous rising trendline.

AUD/NZD 4H Chart 2/8
audnzd 4h chart 2/8
(click to enlarge)

The 4H chart also shows that price is now below the 200-, 100-, and 50-period SMAs, which shows that there’s not more bullish bias, and possible a slight bearish one in the 4H chart. The RSI meanwhile showed loss of bullish momentum when it crossed below 40.

The breakout stalled around 1.05 and held above it through most of last week. It even rebounded but stalled in the 1.60-1.6025 area. Note that this respected a previous price top, and also puts together a bearish motive wave – Based on Elliott Wave Principles, the retreat from 1.0795 is in a 1-2-3-4-5 manner, where wave 3 is the longest, and wave 4 does not overlap with wave 1. This suggests bears have taken back control in the 4H chart.

In the daily chart, we can see that the bearish implication in the 4H chart could be within a larger bearish implication.

AUD/NZD Daily Chart 2/8
audnzd daily chart 2/8
(click to enlarge)

We can clearly see a downtrend in the last 2 months of 2014. It has since stalled, but the bias and momentum are still bearish based on price action, the moving averages, and the RSI.

The AUD/NZD has the 1.0353 handle in site, with risk of breaking lower to 1.03.

The AUD/NZD has actually been bearish for a few years now. We can see that in the monthly chart, capturing a secular bear market from the highs near 1.3750 in 2011 to historic lows in 2015.

AUD/NZD Monthly Chart 2/8
audnzd monthly chart 2/8
(click to enlarge)

The monthly chart also shows a “corrective” structure in the decline since 2011. Thus, the very short-term bearish signal could be part of the ongoing bear market in AUD/NZD.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.