AUDNZD recently formed an inverse head and shoulders pattern on its daily time frame, indicating that the previous downtrend is about to be reversed. Price already broke past the neckline of the formation, confirming that an uptrend is underway.
The formation is approximately 800 pips in height, which means that the resulting climb could last by the same amount. However, stochastic is already in the overbought area, indicating that a selloff or pullback might take place. RSI is also hitting overbought levels and suggesting that the rally might pause at the current levels.
In addition, the short-term 100 SMA is still below the long-term 200 SMA, which means that the previous downtrend might still be intact. Nearby resistance is located around 1.1200 and if this holds, AUDNZD could make its way back to the next support at 1.0800.
AUDNZD Fundamental Factors
Earlier today, the RBA released the minutes of its latest monetary policy meeting and officials confirmed that they’re inclined to keep policy accommodative. They also added that it is likely and necessary for the Australian dollar to depreciate. Aussie pairs barely reacted to this report though, as there were no clues on when the RBA might cut interest rates.
As for the New Zealand dollar, the RBNZ interest rate cut last week is still weighing on the currency and might continue to do so in the coming days. The central bank specified that they are open to further rate cuts, which could mean more weakness for the Kiwi.
Later on, the global dairy auction in New Zealand could also play a significant role in this pair’s price action, as another decline in prices could mean more losses for the Kiwi. On the other hand, a strong rebound could allow the currency to recover as it would be a sign that the industry didn’t do worse this time around.
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