AUD/NZD has been in a sliding mode since Monday, when it hit resistance near the downside line drawn from the peak of the 10th of August. Yesterday, the pair continued trading south, with the tumble accelerating overnight, and the rate breaking through three support (now turned into resistance) barriers in a row. In our view, the rejection from near the medium-term downside line, combined with the steep overnight fall, keeps the near-term outlook negative for now.
At the time of writing, the rate is trading slightly below the 1.0525 level, the break of which may have opened the path towards the 1.0458 zone, which provided decent support from the 18th of December until the 2nd of January, ahead of the “flash crash”. Now, in case that area fails to stop the rate from drifting lower, this may allow the bears to put the 1.0430 zone, marked by the low of the 3rd of the month, on their radars.
Shifting attention to our short-term momentum studies, we see that the RSI edged south and dipped below its 30 level, while the MACD lies well below both its zero and trigger lines, and points down. These indicators suggest strong downside speed and support the case for some further declines.
On the upside, we would like to see a clear break back above the 1.0570 obstacle before we start examining whether the bears have abandoned the field, at least for a while. Such a break may trigger a recovery towards 1.0605, the break of which could pave the way for the crossroads of the 1.0645 zone and the aforementioned downside line.
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