AUD/NZD Responds to Multi-Year Slope- Short Bias at risk above 1.03
- AUD/NZD rebound in focus- key resistance 1.0548
- Updated targets & invalidation levels
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Technical Outlook:Back in October we noted that AUD/NZD was approaching a critical slope of influence with the long-bias at risk while below 1.0786. The high for the month registered at 1.0765 before turning lower into the close of the year. The decline is now responding to this same slope with the pair turning just ahead of confluence support yesterday at 1.0312/22- this region is defined by the 78.6% retracement of the April 2015 advance, the July low, and a parallel extending off the September lows. Note that the slope of this parallel originates from the January 2014 lows and has continued to guide price action with precision over the past few years.
Notes: Momentum divergence into the lows backed by a resistance trigger-break shifts the near-term focus higher in AUDNZD while above 1.0312. Interim resistance eyed at 1.0485/96 with a more significant confluence eyed at 1.0539/48 - area of interest for exhaustion / short-entries. We’ll also reserve this level as our broader bearish invalidation. Keep in mind that the pair has continued to trade within the confines of a broad descending pitchfork formation dating back to the 2015 high and a breach above this region would be needed to suggest a more meaningful turn is underway.
A break below key support invalidates the reversal play with such a scenario targeting the September lows at 1.0237. Note that volatility on the pair remains subdued with a quarter of the daily average true range (ATR) yielding profit targets of just 16-19pips per scalp. With both the RBA & RBNZ rate decisions slated for next month, the docket remain light this week and we’ll be looking for broader market sentiment to drive intraday prices for now.
Relevant Data Releases
Other Setups in Play:
- Gold Weakness to Subside With Fed on Hold in First-Half of 2017
- Japanese Yen Poised to Fall Further for Two Key Reasons
- Gold Tumbles as FOMC Stokes Rate Expectations- Price at Key Support
- NZD/USD Post-FOMC Breakdown: Initial Support Targets in View
Looking for more trade ideas? Review DailyFX’s 2016 4Q Projections
---Written by Michael Boutros, Currency Strategist with DailyFX
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.