The Australian dollar continues to modestly decline against the New Zealand dollar after a strong rebound that has been in place since early April appears to have found major resistance from the 1.1427 level. The bullish trend is struggling and has made a couple of significant lower highs over the past two months. The recent weakness that has fallen upon the kiwi stems from the belief that the Reserve Bank of New Zealand is likely to cut rates again, but not necessarily at the September meeting.
The AUD/NZD daily chart displays the recent slide appears to poised to test the 50-day SMA, which currently trades at the 1.1120 level. If we see stronger selling pressure take the currency pair below this key support level, major support will come from the psychological 1.09 handle. This major support level should be difficult to breach, but if it is further support could come from the 1.0690-1.0771 zone.
For the remainder of the year, we could see price trade rangebound with price ultimately testing1.1460, which is the 38.2% Fibonacci retracement level of the longer-term bearish drop from 1.13792 to 1.0019.
The trade: Buy AUD/NZD at 1.1120 with a stop loss at 1.1070 and a take profit at .1.1320. The Risk/Reward Ratio is around 1:4
Edward J. Moya
Chief Technical Strategist