AUD/NZD Set to Reverse?

The AUD/NZD has been in a severe downtrend since March of this year, but today it is showing signs of reversal. There are a few key components I look for in big reversals. Technically, I try to find at least three lined up. Today, I have them:

  1. Fibonacci retracement or extension pivot
  2. New trend lows or highs and then reversal
  3. Channel Support or Resistance test

There are other “not so obvious” things I can look for, but looking at the daily chart below we have all three that I have listed above:

5-7-13AUDNZD

You can see the 127% extension was hit today at 1.2000. Also, we hit a new trend low and are setting up a nice reversal (hammer) candle. Also, the 6+ month channel support lower support has been tested.

What I am now looking for is a sustained break above the steep trend line seen on the 4 hour chart below. That price is about 1.2060.

5-7-13AUDNZD1

Fundamentally, the RBA cut rates overnight to a historic low. This maybe bearish for the AUD moving forward. But if you consider the overheated housing market in New Zealand, the already priced in rebuilding of Christchurch, and an economy that is heavily depended on Australia and Asia and an overly strong currency (which is not welcomed by the RBNZ) a rate cut for New Zealand may be around the corner as well.

 

Disclaimer: I do have a long in the AUD/NZD currency pair and I am looking to add to the position.

 

You can follow me on Twitter or StockTwits @pipczar

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