AUD/NZD Technicals – Outlook Bearish despite post RBA Rally

Aussie strengthened after RBA rate decision despite keeping rates on hold as expected. Traders have started to become immune to Central Banks’ rhetoric, and punished RBA’s non-action by appreciating the Aussie further even as Governor Stevens said that he’s “surprised” that Aussie remained high despite 2012 easing actions. Hindsight is 20/20, but the market has already shown us its impatience earlier when BOJ’s nominees testimonies were met with JPY strengthening despite more talks of “bold monetary actions”. The AUD rally is felt across all crosses, and AUD/NZD rallied too, showing that the rally is due to inherent AUD factor alone and not geographical economic factors (e.g. China economic outlook) that will affect both NZD and AUD at the same time.

Hourly Chart


Bulls certainly benefited from the AUD rally, with price managed to push above the Kijuu-Sen (red line) immediately after the announcement was released. Price continued to rally after that, encroaching into the Kumo, with the Senkou Span B (Kumo upper parameter) potentially providing some resistance against further upside. Though price is trading above the swing high around 1.235, price should preferably trade above the 1.236 to open up 1.239 ceiling as a viable topside objective. However Stochastic readings is lowering the possibility of such scenario with readings entering Overbought region and appears to be topping.

Daily Chart


Same situation is seen on the Daily Chart. Price is also facing the Kumo as resistance with further resistance found in the form of 38.2% Fib retracement. Stochastic is also topping, adding strength to the 2 aforementioned resistance levels. However 1.23 and confluence with the Kijuu-Sen provides some support which may keep AUD/NZD trading sideways for the next few trading periods until the Kumo force a move either on the upside or downside eventually.

A large part of Jan’s decline is attributed to the dovish nature of RBA and hawkish tone of RBNZ. The reversal of dove/hawk tone is also the factor that drove prices higher back in Feb. Now that traders are starting disregard Central Bank talks, the prime factor of AUD/NZD direction is gone. As such, we could see an extended period of sideways movement in the weeks to come until either Central Bank walk the talk and start to modify their rates.

More Links:
AUD/USD – Rallying Back to the Key Level at 1.02

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Mingze Wu

Mingze Wu

Currency Analyst at Market Pulse
Based in Singapore, Mingze Wu focuses on trading strategies and technical and fundamental analysis of major currency pairs. He has extensive trading experience across different asset classes and is well-versed in global market fundamentals. In addition to contributing articles to MarketPulseFX, Mingze centers on forex and macro-economic trends impacting the Asia Pacific region.
Mingze Wu