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AUD/USD in Tatters after Fake Breakout, NZD/USD Fails to Confirm Double Bottom

AUD/USD in Tatters after Fake Breakout, NZD/USD Fails to Confirm Double Bottom

Diego Colman, Contributing Strategist

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AUD/USD AND NZD/USD FORECAST:

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AUSTRALIAN DOLLAR TECHNICAL ANALYSIS

On Tuesday, I discussed how AUD/USD (Australian dollar - US dollar) has been trading largely sideways since early March, moving predictably within the confines of a lateral channel while flawlessly respecting the upper and lower boundaries of the technical pattern, two regions that can be seen as resistance and support, respectively.

The pair (Aussie) challenged the topside of the range (0.6800) it has been stuck in for more than two months earlier this week, but was quickly and forcibly rejected lower from that region after a brief and fake breakout, a sign that sellers are determined to reassert control when markets get stretched.

With downside pressure accelerating after the ceding of the 200-day simple moving average, AUD/USD could head lower in the coming days, but to have more confidence in the downside scenario, a stronger bearish signal is required.

Confirmation that the bears have become the dominant force could come from a clear and clean breach of support at 0.6680. A sustained drop below this floor could pave the way for a deeper pullback, with the 2023 lows as the next possible area of interest for speculators.

Conversely, if technical support at 0.6680 holds, buyers would be better positioned to resume the rebound, in which case, we cannot rule out a move towards 0.6730 - the first resistance to watch. Above this ceiling, 0.6800 could become the next barrier on the journey north.

AUD/USD TECHNICAL CHART

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AUD/USD Chart Prepared Using TradingView

NZD/USD Bearish
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 13% 11% 12%
Weekly 22% -20% 2%
What does it mean for price action?
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NZD/USD TECHNICAL ANALYSIS

NZD/USD (New Zealand dollar - US dollar) has been forging a bullish double-bottom pattern in recent months. The technical formation was on the verge of completion and confirmation, but prices failed to clear neckline resistance at 0.6385 earlier this week, paving the way for a steep pullback in the ensuing trading session.

While the double-bottom setup has not yet been completely invalidated, the chances of a successful bullish outcome will diminish so long as sellers retain the upper hand and push prices further down. If this scenario plays out, initial support appears at 0.6275, followed by 0.6215, the 50-day simple moving average.

On the flip side, if bulls manage to stage a surprising turnaround and prices resume the trek upwards, resistance is located at 0.6380. A successful and sustained move above this barrier will nourish positive sentiment, creating the right conditions for a rally towards 0.6550, and 0.6625 thereafter.

NZD/USD TECHNICAL CHART

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NZD/USD Chart Prepared Using TradingView

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

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