Published: September 8th, 2020
On August 18, AUD/NZD has reached and cleanly rejected the long-term downtrend trendline, while testing the 103-weeks high at 1.1043. At the same time, it has clearly rejected the 23.6% Fibonacci retracement level applied to the last upside correction when the price has reached the second point of the downtrend trendline. This was a very clean bounce off an extremely strong resistance, suggesting the validity of a long term downtrend.
After the rejection of the resistance, during the next 2 weeks, the price has been declining consistently and has reached 1.0815 low on September 3. But it hasn’t tested the key short term support level, which means that there could be more downside potential. The nearest support is located at 1.0766, which corresponds to two Fibonacci retracement levels, 50% and 88.6% as per the weekly chart.
Today, the price has reached and cleanly rejected the 127.2% Fibonacci retracement level applied to the previous corrective wave down. Simultaneously AUD/NZD is rejecting the middle trendline of the ascending channel, which eventually should result in the further price decline. It seems that the price has reached a strong supply zone, and while spikes above are likely to occur, the trend remains bearish for the time being. The lower trendline of the channel corresponds to the previously mentioned support level at 1.0765, which could be the next downside target.
Here we can see a consistent rise where AUD/NZD has been trending within the ascending channel. The breakout followed, producing an area of resistance that corresponds to the breakout of the previous support located at 1.0930.
However, AUD/NZD has reached and rejected the long term uptrend trendline, which might suggest the consolidation phase. Currently, the price has approached and rejected the 127.2% Fibonacci retracement level applied to the previous downside correction. This is the 1.0900 level which is a very strong psychological resistance. Therefore, as long as the daily close remains below the 1.0900 - 1.0930 resistance area, the trend will be bearish. While the downtrend is valid, AUD/NZD should be aiming towards the 1.0765 support level as per the weekly chart.
On the 4-hour chart, AUD/NZD broke below the uptrend trendline and continues to decline within the descending channel. Right now price has approached the top of the channel, which might result in more selling pressure over the next 48 hours. So far, the upper trendline of the channel has been rejected cleanly along with the previous level of support (currently the resistance).
It is very likely that AUD/NZD will be producing spikes higher, but the most important factor is that price must remain within the red area (as per the 4-hour chart) for the trend to remain bearish. The short-term consolidation phase should be expected before/if the price will start moving lower. But, if there will be a daily break and close above the 1.0930, the bearish forecast will be invalidated. However, as long as the downtrend is valid, price decline holds a much higher probability in relation to the uptrend.
Finally, we are moving to the most common timeframe, the 1-hour chart. We can clearly see the area of resistance which corresponds to the 61.8% Fibonacci retracement level applied to the overall move down.
Price broke below the support of the downtrend trendline, which also implies selling pressure in the long run. The current corrective move up might look extremely attractive for the short term sellers as well as swing traders. However, daily closing prices must be watched, because break and close above the red area will definitely invalidate bearish outlook.
Based on this chart, we can make a conclusion, that there is a strong support area, between 1.0765 and 1.0788. Thus, there is a strong probability that the price will move down by over 100 pips in the coming days.
Based on previous NZD-related analysis, the New Zealand Dollar does look very attractive in terms of holding this currency. It looks strong in relation to multiple other top fiat currencies in general and the Australian Dollar in particular. Currently, the price has entered a strong supply zone, and if the price will not break to the upside, the downtrend will continue.
As per the Weekly and 1-hour charts, there are two support levels making it a strong demand zone for the short term speculators. This area is located between 1.0787-1.0766, making it quite an important area to watch in the very near future.
As per the 4-hour chart, the key resistance is located at 1.0930. Daily break and close above this resistance will immediately invalidate bearish forecast and long term uptrend is likely to begin.
Support: 1.0765, 1.0788
Resistance: 1.0930, 1.0900