The AUD/NZD continued to make fresh record lows this year. However, since mid-February, it has been trading in more of a sideways manner. Let’s take a look at the charts to see if this is a price bottom or simply a range consolidation.
Key Resistance: Usually, when the prevailing trend is bearish, I would prefer the range consolidation scenario, which is to say the market is neutral-bearish, with emphasis on the bearish component. In this outlook, we should find resistance in the 1.0475-1.0505 area, which is a support/resistance pivot area as we can see in the 4H chart. Note that the 200-period SMA resides in this area, and the 4H RSI has already pushed above 70, so if there is a bearish divergence while price is in this area, we should look for a bearish attempt at least in the short-term.
Central Pivot: Now, we should expect some resistance in the noted area even if our outlook is bullish. If the bearish attempt fails to clear the 1.0375-1.04 area, then there will be more evidence that AUD/NZD is trying to build a price bottom. Otherwise, a break below 1.0375, brings the pair back below the middle of the current range as well as under the 100-, and 50-period SMAs.
Let’s examine the bullish scenario. The 4H chart above shows that there is a fractal double bottom forming. This gives me more reason to believe the market is trying to find a price bottom. The 4H RSI tagged 70, which shows bullish momentum. If the RSI reading can then stay above 40 while price stays above 1.0375, the bullish outlook would be valid.
However, we should still keep the prevailing downtrend in mind.
We can see in the daily chart that, just above 1.05, there is a falling resistance line around 1.0570. Again, if price falls but holds above 1.0375-1.04, there would be a chance that the market wants to break above this line, which would open up the 1.08 area. The bullish divergence seen in the daily chart also suggests a period of consolidation, bullish correction ahead.
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