AUD-NZD Could Turn Bullish Again

By: Mike Kulej

The currencies of Australia and New Zealand have had a very interesting relationship lately. In the later part of 2010, the AUD-NZD rallied almost 900 pips, only to be followed by an over 600 pips sell off. These are large moves for this pair, especially considering that they happened during an only three months time span.

AUD/NZD Forex Technichal Analysis - 18 January 2011

This means that the volatility is high and likely to remain so for the immediate future. That, in turn should translate into sustainable strong price swings, covering hundreds of pips on the daily chart. The only question is which way?

At the moment, the AUD-NZD is at a point where the next big move could be decided. After falling from 1.3510, this pair has reached 1.2850 and, more importantly, is testing the major uptrend trendline. This could lead to a bullish reversal, since this trendline has proved to provide a solid support before and might do it again.

The technical indicators paint a mixed picture. For example, the Stochastic Oscillator is oversold, while the RSI is not, but showing low reading. Attention should be focused on the price action itself.

An emergence of a bullish candlestick at the trendline will suggest a bullish reversal. On the other hand, if the support fails, the AUD-NZD is likely to move lower, perhaps test the 1.2635 low.

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