Don’t look now, but AUD/NZD is already testing its descending trend line on the 4-hour chart!
Will the selloff resume from here?
Or are we about to see the start of a reversal?
The Aussie got a bit of a boost in the previous trading week, thanks to the RBA minutes revealing that policymakers considered hiking interest rates then.
However, the hawks were outnumbered, as more RBA officials built a stronger case to sit on their hands for the time being and wait for more convincing signs of an inflation pickup.
Remember that directional biases and volatility conditions in market price are typically driven by fundamentals. If you haven’t yet done your fundie homework on the Australian dollar and New Zealand dollar, then it’s time to check out the economic calendar and stay updated on daily fundamental news!
Right now, AUD/NZD is hitting a ceiling at the descending trend line that’s been connecting highs since November. Aussie bears appear to be defending the resistance, which is right around the 1.0800 major psychological mark and the 200 SMA dynamic inflection point.
The 100 SMA is below the 200 SMA to hint that bearish vibes are present, so the pair might still set its sights on the next support zones. In that case, keep an eye out for a move to S1 (1.0760) near the 100 SMA or all the way down to S3 (1.0690) near the recent lows.
Stochastic has some ground to cover before indicating oversold conditions, so bearish pressure might stay in play. However, the oscillator already seems to be crossing upwards and turning higher to suggest that bulls are eager to return.
If so, watch out for a break past R1 (1.0820) that might be followed by a rally to the next upside targets at R2 (1.0850) then R3 (1.0880).
There’s not much in the way of top-tier economic releases for the rest of the week, though, so make sure you keep tabs on headlines that could impact overall market sentiment!