Tomorrow could provide an exciting Asia session, assuming volatility is your thing, as RBNZ provide their OCR decision and AUD traders eagerly await employment figures.
- Recent price action suggests sideways / complex correction for the weeks ahead
- With RBNZ and RBA jeeping rate cuts on the table a parabolic trend is less likely to occur
- Until the two Central Banks diverge their policies further then short holding times are preferred
- Intraday price action present decent levels of S/R to consider as reversals and / or profit objective
The chart below shows AUDNZD weekly closing price, alongside Candle range and 10 period average of the range. This visually shows us that we can see this currency pair can easily move in excess of 300 pips per week but, at time of writing, it has only moved 100 pips as we await tomorrow's data. (The 10 week average currently sits at 224 pips).
Traders are not yet ready to commit as they would want to see more of a divergence between the two economies and I suspect this is a theme that will continue to persist for the weeks ahead.
Over the past five weeks the currency pair has exhibited four indecisive candles, whilst the bullish momentum which preceded this pattern has weakened. To me this suggests the cross could continue to range or enter a complex correction and, both on a technical and fundamental level, likely to remain in one for the weeks ahead.
Both RBA and RBNZ have rate cuts on the table yet neither want to cut. So for a more directional move to evolve traders would require this theme to diverge, with one central bank either cutting rates or signalling to the markets they have no intention of cutting rates. Until this occurs then we can expect choppy seas ahead and traders would be prudent to lower their hold time and profit objectives.
Early days yet but I have highlighted the potential for a Bearish Wedge to form on the lower timeframes. For the reasons mentioned above I suspect the potential for a complex correct are high, so this could easily morph into an H&S, Double / Triple Top, Ascending Triangle or any combination of these patterns until a diverging theme occurs.
That said, we are presented with decent zones of support or resistance to consider as reversal points or profit objectives. At time of writing AUDNZD is holding above 1.066 / 1.0699 support zone (Monthly Pivot and 61.8%) despite Glenn Stevens providing a Dovish speech less than one hour ago. I suspect this level could hold until tomorrow's RBNZ decision as traders are likely to sell the Kiwi Dollar leading up to the OCR decision, before closing short positions once RBNZ reveal rates to remain on hold. If this does occur then AUDNZD is likely to recycle lower as it awaits the employment data.