AUD/NZD has been in a rally mode recently. On Wednesday, the pair skyrocketed after it hit the upside-support line drawn from the low of the 12th of April, while on Friday, it emerged above the upper bound of a medium-term downside channel that has been containing the price action since mid-October. In our view, this keeps the door open for the pair to continue drifting higher, at least in the short run.
If the bulls are strong enough to stay in the driver’s seat, we would expect them to aim for the 1.0880 barrier soon. However, we would like to see a decisive break above 1.0895, a resistance marked by the peak of the 8th of February, before we get confident on larger upside extensions. Such a break is possible to set the stage for our next resistance of 1.0935, defined by the inside swing low of the 25th of January.
Turning our attention to the short-term momentum studies, we see that the RSI has topped within its above-70 zone, while the MACD, although above both its zero and trigger lines, shows signs of topping as well. These indicators detect slowing upside speed and suggest that a corrective pullback may be on the cards before the bulls decide to take charge again, perhaps for a test near the 1.0840 support, or the upper bound of the aforementioned channel.
In our view, a decisive break back below 1.0815 is needed to signal that the rate is back within the medium-term downside channel. Such a break could initially aim for the 1.0795 support level. Another dip below that obstacle could carry more downside extensions, perhaps towards the 1.0760 zone, defined by the inside swing peak of the 22nd of March.
Article written by Charalambos Pissouros, Senior Market Analyst at JFD Brokers