AUD/NZD declined considerably from early October’s peak of 1.0992 to eventually hit a seven-month low of 1.0588 on Tuesday. It is currently trading not far above the aforementioned trough.
Attesting to the bearish short-term bias are the negatively aligned Tenkan- and Kijun-sen lines. Notice though that the two appear to have halted their declines, which may be an early sign of weakening negative momentum. Lending credence to this view is the RSI which is moving sideways in bearish territory. Additionally, notice that the indicator has entered oversold levels, suggesting that the selloff may be overextended. Thus, a rebound in the near-term is not to be ruled out.
Initial support to further losses could occur around yesterday’s bottom of 1.0588. Below, the pair’s declines may stall around 1.0525, which is where the head-and-shoulders pattern completed in October roughly projects too. Even lower, the 1.0487 nadirs, AUD/NZD’s lowest since July 2017, would be eyed.
On the upside, resistance could come around the current level of the Tenkan-sen at 1.0676; the area around this also includes the June bottom of 1.0656. Further above, the Kijun-sen at 1.0743 would come within scope, while even higher, the attention would turn to the 50-day moving average line at 1.0830 – a couple of bottoms from previous months at 1.0839 and 1.0855 are also part of the area around this point.
In terms of the medium-term picture, it is looking negative: the pair is in a downtrend, with trading activity taking place below the 50- and 100-day moving average lines, as well as below the Ichimoku cloud.
Overall, both the short- and medium-term outlooks look bearish at the moment. However, there are signs of easing negative momentum as well as of overstretched losses in the near term.
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