The Australian Dollar is gaining against the New Zealand Dollar. The AUD/NZD Daily chart shows a market that has passed several challenges to signal a bullish reversal.
Here are some observations from the daily chart.
1) There was a price bottom completed at the end of April when price broke above 1.0222.
2) The breakout extended above a falling trendline that came down from the Oct. 30 high at 1.1304.
3) Price broke above the 100- and 50-day simple moving averages (SMAs) and then treated them as support. This is called a “bullish slingshot” signal. This price action also shows respect of the double bottom as support, and makes the 1.13 an important pivot.
4) The RSI tagged 70 for the first time since September 2014. This shows initiation of bullish momentum going into the medium-term.
5) Price is now testing the 200-day SMA. If AUD/NZD clears it, the pair will pass another test for a bullish reversal scenario.
Here are the assessments for the 4H chart:
1) The week is starting bullish as price action is making a new high on the month, attacking the 1.07 handle.
2) The RSI has maintained a picture of bullish momentum.
3) We mentioned the key pivot area around 1.03. But even a break below 1.0475 might open up a bearish continuation attempt, at least towards that 1.03 area. In this scenario, look for the 4H RSI to fall below 40, which would show loss of the prevailing bullish momentum.
Now, this is a bull’s market even though the RBA cut rates last week. The fact that the RBA made 2 rate cuts in 2015, makes it unlikely that the central bank will make another rate cut. This anticipation shifts the RBA from dovish to neutral, and thus is giving the AUD some strength. Meanwhile, the RBNZ still has a rate cut on the table and is therefore relatively more dovish than the RBA in terms of monetary policy expectations.
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