AUD/NZD Trading Down to Key Support Factors

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AUD/NZD Trading Down to Key Support Factors

The AUD/NZD is at a key juncture. In the 4H chart, the technical signs are all bearish.
1) Price is making lower highs and lower lows and is below the 200-, 100-, and 50-period simple moving averages (SMAs).
2) The SMAs are sloping down and are in bearish alignment.
3) The RSI has held below 60 and has been able to tag 30 and lower, showing persistent bearish momentum.

AUD/NZD 4H Chart 11/25
audnzd 4h chart 11/25

(click to enlarge)

Bearish Breakout: In the past week, price consolidated a bit above 1.0930. However, price continued to hold below the SMAs, and is now breaking below the consolidation support into new lows on the month.

Bearish Continuation: In the 4h chart, it simple looks like a bearish continuation signal. The range was roughly 90 pips wide, and a projection 90 pips below 1.0930 would target the 1.0840 level. But when we take a look at the daily chart, we can see that the bearish continuation outlook is running into a key support area.

AUD/NZD Daily Chart 11/25
audnzd daily chart 11/25
(click to enlarge)

Consolidation Ranges: When we look at the daily chart we can see that price is now at a multi-month consolidation low around 1.0920. Before the consolidation started in August, price was consolidating roughly between 1.05 and 1.0920 before price action in  July shook things up.

We can say that 2014 was divided into 2 range, and we are at the bottom of the higher range now. Another way to look at it is that price is in the middle of 2014’s price action.

Support: As price approaches the psychological level of 1.09, and as the daily RSI dips to 30, we should expect buyers. After all, the overall market in 2014 was sideways, with a slight bullish bias. A break below 1.09 however opens up a bearish outlook.

In either case, when we see a pullback, we should limit the bullish outlook first to the 1.1035-1.1050 area and at most the 1.11 handle (where the 50-day SMA resides). If price holds below 1.10, the bearish outlook is still alive. A break above 1.11 however opens up a bullish outlook, especially if the 1.09 level held.

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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.