Key Points:
- The pair has reached a very robust level of support.
- Upsides will be tangible but not as pronounced as last time’s reversal.
- Keep an eye on the RBNZ’s report, due shortly.
Given the rather sedate prior session resulting from public holidays in both the US and the UK, some of the more exotic crosses are worth investigating a little more closely today. In particular, the AUD/NZD has set itself up for what could be a decent rally over the coming week – at least if its technical bias is anything to go by.
As is shown below, the rout that has been gripping the pair over the past few sessions has come to an abrupt end as support kicked in strongly. However, this really shouldn’t come as a total surprise given that we have reached the point of intersection of the declining trend line and the lower extreme of the regression trend channel. What’s more, the presence of this channel suggests that we might now see some form of recovery as we move forward.
Indeed, we are already beginning to see buying pressure return as the market attempts to relieve the highly oversold stochastic oscillator. If this continues, it could mean that we have a near-term corrective manoeuvre on our hands which is good news for the bulls out there. This being said, we aren’t currently expecting to see a huge degree of upside action moving ahead as there is a highly robust zone of resistance in place at around the 1.0611 level.
More precisely, the intersection of the regression channel’s basis line and the 38.2% Fibonacci level will likely prove to be a hard cap on gains without some form of fundamental upset. This cap is only reinforced by the parabolic SAR and EMA biases – both of which are bearish. Ultimately, whilst they shouldn’t hamstring the bulls altogether, these readings are likely to prevent the kind of kneejerk price spike that we saw only a few weeks ago and this means that we are unlikely to see more than 70 pips netted in a single session this week.
Overall, expect to see some buying pressure coming down the line but don’t ignore the presence of that resistance level. Although, keep half an eye on the RBNZ which will be releasing its Financial Stability Report shortly as this could generate some unexpectedly strong bullish sentiment for the pair should the bank have a more dour tone than we have seen recently.