- The AUD/NZD has rallied a bit during the trading session on Wednesday as we continue to see a lot of volatility in the Forex markets.
- Ultimately, the Australian dollar has been oversold against the Kiwi dollar, so it does make sense that we get a little bit of a bounce in this region.
- We tested the 1.0550 level and then bounced 48 hours ago.
Pay close attention to the Reserve Bank of Australia because looking at this chart, it's easy to see just how overdone we have been, they have suggested that they might have to fight inflation, but on the other side of the Tasman has been the Royal Bank of New Zealand, which has been extraordinarily aggressive with its interest rate policy. Because of this, the bounce could give us a nice opportunity if we are patient enough.
Waiting for a Bounce
Looking above, I believe that the 1.08 level will be a barrier that’s difficult to get past. If we can break above there, then it’s possible that we could really pick up momentum, but the 50-Day EMA should continue to come into the picture, offering a bit of a short-term ceiling in the market. When you look at the longer-term charts, you can see that just about 18 months ago this pair had been all the way down at the 1.03 level, and that might be where we go before it’s all said and done. Nonetheless, this market got ahead of itself so let it breathe a bit and shows signs of exhaustion that we can short.
On the other hand, if we turn around and reach the 1.0550 level, there is a “micro double bottom” in that area, so it’s obvious that it is going to be short-term support. I would prefer to see this market continue to bounce a bit before shorting because it gives it the ability to develop the necessary momentum to break through the bottom.
Ultimately, I suspect that both markets are going to have their own issues, but it seems that New Zealand is a little bit more aggressive, and that continues to be the major deal when it comes to how this pair goes. I do not have any interest whatsoever in trying to get too cute with this, so I’m just going to wait for a bounce and a rollover.
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