AUD/NZD Showing Signs of Life with Upside to 1.09

AUD/NZD Showing Signs of Life with Upside to 1.09

The AUD/NZD started the year falling and continuing a prevailing downtrend, eventually into a fresh all-time around 1.0355 on January 5, 2015. After finding support here, the pair has rebounded quite sharply, showing that AUD/NZD might be shifting away from the bearish trend, though it is too premature to consider a bullish outlook just yet. Let’s take a look at the daily chart.

AUD/NZD Daily Chart 1/22
audnzd daily chart 1/21
(click to enlarge

The daily chart shows that price action in the past 2 weeks broke above a falling trendline, and is now breaking above the 50-day SMA, tagging the 38.2% retracement level (of the 1.1304-1.0353 downswing) at 1.0716. The RSI is breaking above 60, which shows loss of the prevailing bearish momentum. However, if price returns below 1.0640, we will likely see the RSI fall back below 60, which could be a sign that the bearish momentum is still maintained, though it is no longer as sharp. Also, below 1.0640, price would return under the 50-day SMA.

Now, let’s take a look at the 4H chart.

AUD/NZD 4H Chart 1/22
audnzd 4h chart 1/21
(click to enlarge)

1.0640 pivot: The 4h chart shows that 1.0640 is also a previous resistance pivot. A break below that takes away some bullish bias, but in the 4H chart, we can see that there is room to fall even within the bullish mode, especially in the short-term.

Support: It appears that 1.0550-1.0575 is a key level in the short-term. It is where a rising speedline might challenge price. It is in the middle of the 200-, and 100-period SMA, and a previous resistance area. A break below 1.0550 would be a stronger signal of bearish continuation. In the bearish continuation scenario, look for the 4H RSI to at least break below 40, which would show the lost of the bullish momentum built up in the past couple of weeks.

Bullish Outlook; Targets: Otherwise, the AUD/NZD could still be bullish in the short-term, and turning bullish-neutral for the medium-term. Now in this bullish scenario, looking back at the daily chart, we can see that the fibacci retracement levels of 50% and 61.8% are 1.0830 and 1.0940 respectively. Also note that around the 61.8% retracement level is a previous support in 2014. 1.09 level is near the 200-, and 100-day SMAs, making the 1.09-1.0940 level a key resistance and probably a prudent limit to any bullish outlook rising out of this past 2 weeks of price action.

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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