Short Term Reversal in AUD-NZD

By: Mike Kulej

Both the Australian Dollar and the New Zealand have been under market pressure for some time. Most analysts connect it to the Euro crisis and the anticipated global economic slowdown. During this period, the New Zealand Dollar remained stronger of the two, pushing the exchange rate of AUD-NZD from 1.3200 all the way down to almost 1.2100 level, a rather large price swing for this pair.

Over the last few days, price movement stabilized and this currency cross is building a reversal base, best visible on the hourly chart. A relatively strong resistance has developed at the 1.2385 level. An upside breakout above that price would signal a short-term trend reversal and a possibility for this pair to climb to 1.2500 and higher. Other technical indicators support this bullish trend change.

The MACD indicator has positive reading, but is not overbought. In addition, the price is firmly above the 100 SMA, which is often a bullish sign. If the 1.2500 level is reached, the intermediate term will also turn bullish, possibly creating the right conditions for even larger advance.

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