AUD/NZD: Short-term bullish patterns

Earlier this month, we highlighted some of the bullish longer-term developments in AUD/NZD, including a triple bullish divergence in RSI and the break of a 1-year bearish trend line. The pair proceeded to rally to 38.2% Fibonacci retracement resistance near 1.0900 last week before falling sharply on a weaker-than-expected inflation report out of Australia. Despite last week’s setback, the technical picture on AUD/NZD is turning bullish once again for a possible retest of resistance at the 1.0900 handle.

The pair carved out a nice inverted Head-and-Shoulders pattern in the latter half of last week. This classic bottoming pattern shows a clear shift from a downtrend (lower lows and lower highs) to an uptrend (higher lows and higher highs), and often marks a meaningful bottom in the market. Adding to the bullish evidence, rates pulled back in a shallow controlled manner yesterday, indicating that buyers remain in control of trade and creating a short-term bullish flag pattern (green).

The secondary indicators are painting a more mixed picture. One sign of concern for buyers has been the 4hr RSI, which has not been able to rise above the key 60-65 resistance zone since the very beginning of the month. Bulls will be watching for a confirmed breakout above this zone to suggest that the pair could potentially break above longer-term resistance near 1.0900. Meanwhile, the 4hr MACD recently crossed above its signal line and the “0” level, suggesting a shift to short-term bullish momentum.

At this point, the inverted Head-and-Shoulders and bullish flag patterns point to a possible rally toward the 1.0900 handle, with measured move targets at 1.0895 and 1.0905 respectively. However, given the longer-term Fibonacci resistance in the 1.0900 zone and lack of major data from Australia and New Zealand, rates may struggle to break through that barrier this week. Conversely, a reversal back below support at today’s Asian session low and the Head-and-Shoulders neckline at 1.0820 would cast doubt on the short-term bullish outlook.


Chart: Forex.com

About the Author
Matt Weller

Senior Technical Analyst for FOREX.com. Matt has actively traded various financial instruments including stocks, options, and forex since 2005. Each day, Matt creates research reports focusing on technical analysis of the forex, equity, and commodity markets. In his research, he utilizes candlestick patterns, classic technical indicators, and Fibonacci analysis to predict market moves. Matt is a Chartered Market Technician (CMT) and a member of the Market Technicians Association. You can reach Matt directly via e-mail (mweller@gaincapital.com) or on twitter (@MWellerFX).

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