By Greg Holden
Following yesterday’s earthquake in New Zealand – which some expect will claim upwards of 70 lives – the Reserve Bank of New Zealand (RBNZ) appears poised to reduce interest rates in order to ease concerns. New Zealand stocks also plummeted yesterday as a result of the 6.3-magnitude quake.
Further weighing on the Kiwi, however, are a number of technical indicators which seem to show additional bearishness for the NZD ahead of a potentially wide swing in value.
As we can see in the chart below, the AUD/NZD appears to have formed a clear head-and-shoulders pattern.
What is worth highlighting is the shoulder line. As shown, the pair still has some room to run before touching the shoulder line of this chart formation, meaning traders may want to speculate on further bearishness for the Kiwi this week.
To support this notion we can also see on the MACD that the bearish cross is near completion, but not yet fully formed (i.e. the cross has not yet crossed). The Stochastic (slow) also appears to have fallen below the over-bought 80 line, hinting that technical pressure may have eased, allowing the pair to continue rising to at least 1.3400, and perhaps a bit higher, before meeting solid resistance.
If this head-and-shoulders pattern comes to fruition, the downward retracement should see the pair falling towards a range near 1.2950 over the subsequent weeks. But traders should also note the historically significant level at 1.3050 which has caused halting movements in both directions over the past year.
AUD/NZD – Daily Chart
Forex Market Analysis provided by ForexYard.
© 2006 by FxYard Ltd
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