AUD/NZD: Unpacking the Potential End of a Short-Term Rally

The Pulse of the Market: A Closer Look at AUD and NZD

In the early European trading session on Monday, the financial markets experienced a period of low volatility, significantly influenced by the aftermath of the US non-farm payroll data on Friday. The anticipation around Federal Reserve Chairman Jerome Powell’s comments on upcoming CPI data has kept market participants on edge, especially considering the broader implications for interest rate policies tied to inflation trends. Amidst this backdrop, the Australian and New Zealand dollars, both heavily reliant on commodity exports, find themselves at a crossroads due to emerging signs of economic slowdown in their respective economies. The waning expectation of interest rates cut by the Reserve Bank of Australia further complicates the picture, casting a shadow over the AUD/NZD exchange rate.

Technical Deep Dive: The End of the Bull Run?

Technical indicators are signaling a potential halt to the AUD/NZD pair’s short-term bullish momentum. A pivotal moment has been reached as the pair broke below the 1.07121 support level and exited a three-week ascending trend line. This breakdown has pushed the pair below the 34 moving average, landing squarely at the immediate support level of 1.07070. The market’s next move could see sellers pushing the currency pair towards the next support zone, identified between 1.07006 and 1.06935. Further descent could challenge the 1.06820 level, which aligns closely with the 100-moving average (WMA).

In short-term, it is probable that the AUD/NZD manages to sustain above the critical support at 1.07070 before further drop and we might witness a retest of the recently breached trend line around 1.07191.

Alternative Scenario: A Bounce Back?

However, for the bullish momentum to resume, the pair needs to break above the 1.07307 resistance level, setting the stage for a challenge at the 1.07467 mark.

Charting the Key Levels

– Resistance Tiers: Look out for ceilings at 1.07191, 1.07307, and the pivotal 1.07467.

– Support Foundations: The pair finds immediate footing at 1.07070, with subsequent layers at 1.07006, 1.06935, and a more substantial base near 1.06820, close to the 100 WMA.

Upcoming Economic Milestones

The trading sentiment towards AUD and NZD will soon encounter new tests with significant economic events on the horizon:

– Australian Business Confidence: A report due early Tuesday might offer the AUD a lifeline if it surpasses expectations.

– US Inflation Data: Set to be released on Tuesday at the beginning of the US trading session, this data will likely impact the direction of both the Kiwi and Aussie currencies, underscoring the interconnectedness of global financial markets.