By: Mike Kulej
The Australian Dollar had been in a long-term uptrend in relation to the New Zealand Dollar for some time now. This current leg of the bull market started in 2008 and recently, in early March, the price climbed to 1.3780, which is the highest level in almost 20 years.
Since then the rally faltered, and the AUD-NZD dropped to 1.3190. This happens to the middle part of the preceding up swing, from 1.2773 to 1.3780. To be more precise, the price almost touched the 62% Fibonacci retracement level. The general area between 38% and 62% levels is where reversals often happen.
We might expect the uptrend to resume from here with the AUD-NZD possibly testing previous highs. After all, the Stochastic Indicator shows very low reading, suggesting short-term oversold conditions, which is in line with Fibonacci analysis.
However, one should be very cautious. The price is very close to the long-term trendline. If the AUD-NZD drops under this support, the entire main trend will become questionable, severely limiting any upside potential. After all, every trend ends eventually.