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AUD/NZD Inverse Head-and-Shoulders Formation Remains in Focus

AUD/NZD Inverse Head-and-Shoulders Formation Remains in Focus

David Song, Strategist

AUD/NZD Weekly Chart

AUD/NZD Weekly Chart

Chart - Created Using FXCM Marketscope 2.0

With AUD/NZD breaking out of the downward trend from 2011, the inverse head-and-shoulders pattern carried over from 2014 may continue to pan out over the coming months especially as the Reserve Bank of New Zealand (RBNZ) endorses a highly dovish outlook for monetary policy. Even though the Reserve Bank of Australia (RBA) keeps the door open to implement lower borrowing-costs, signs of a ‘soft-landing’ in China – Australia’s largest trading partner – may keep the central bank on the sidelines throughout 2016.

With that said, the aussie may outpace its New Zealand counterpart especially as Governor Glenn Stevens refrains from toughening the verbal-intervention on the local currency, and AUD/NZD stands at risk of extending the advance from earlier this year as long as the Relative Strength Index (RSI) largely preserves the bullish formation from the beginning of the year.

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--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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