Bearish Continuation: When we look at the 4H AUD/NZD chart, we can see a persistent bearish market based on price action, the moving averages, and the RSI which has tagged below 30 and has held below 60. The latest price action during the 12/16 session was a break below a short-term consolidation, signaling bearish continuation.
Dairy Prices: This is more of a Aussie-weakness story as we saw the AUD weak across the board. But the NZD did have some welcoming news in terms of seeing dairy prices rebound according to the GDT Price Index, which came in 2.4% in the first half of December compared to -1.1% in the last half of November.
(click to enlarge; source: forexfactory.com)
While both Aussie and The Kiwi are commodity currencies, the kiwi is more sensitive to dairy prices. We can see that in most of 2014, dairy prices have fallen. The latest rise is the strongest half-month reading since 2013. It might not be enough to go against the USD outside of the short-term, but against the weak AUD, it pulled down the AUD/NZD as we saw in the 4H chart.
Historic Lows: When we look at the big picture here, we should note that price is approaching the 2014-low of 1.0492. Just below that at 1.0426, is the all-time low made in late 2005.
Don’t try to Catch it: The strong bearish monthly candles threaten the 2014 and all-time lows especially with the monthly RSI still above 30.
Don’t expect any major rebound in the AUD/NZD. It looks like a falling knife at the moment, and we should let it fall despite seeing major support levels just ahead. Now, if price does indeed start stalling in this 1.04-1.05 area, we might consider looking for a brief correction against the prevailing downtrend. In this short-term bullish scenario, we should limit the bullish outlook to a support/resistance area in the short-term around 1.0650-1.0750.
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