AUDNZD’s comeback story is that of an underdog currency fighting against what was once a frontrunner. Not long ago the Australia dollar came under extreme pressure due to a progressive lowering of interest rates in Australia, while the NZ dollar was benefiting from the belief that the RBNZ may continue to raise interest rates. This was before the RBNZ did an about-face and began cutting interest rates in an effort to spur domestic demand, resulting in a widespread sell-off of the NZ dollar and pushing AUDNZD back from the precipice that is parity.
Last week we highlighted that momentum in the pair still looked strong in the medium-term, and sure enough price has since rallied to an important resistance zone around 1.1300. If AUDNZD’s recent ability to smash through resistance zone is any indication, price may not have much trouble with 1.1300. However, the pair may have overextended its supply lines and bulls may have to regroup before launching another attack.
In the event that 1.1300 is broken, we’re keeping an eye on 1.1600 and then road looks somewhat clear to the big 1.2000. On the downside, there’s some room for a retracement towards 1.1000 and our overall long-term technical bias remains higher above this level. There’s some bearish divergence between price and RSI on an hourly chart which indicates that the rally may have run out of steam in near-term.