AUDNZD confirmed a long-term reversal pattern, breaking below the neckline of its double top formation on the daily time frame. This signals that price could fall by around 800 pips, which is the same height as the chart pattern.
The 100 SMA is below the 200 SMA so the path of least resistance is to the downside. However, stochastic is already indicating oversold conditions, which suggests that buyers could take over once sellers take a break. If so, price could still pull back to the broken neckline around 1.0500 to 1.0600.
A move back above the neckline could indicate that the breakdown was a false one, possibly putting AUDNZD back on track towards testing the previous highs at 1.1300.
There are no major reports up for release from both Australia and New Zealand for the rest of the week, as it appears that risk sentiment has been the biggest market-mover these days. The Brexit decision has weighed on risk appetite but it appears that the New Zealand economy is on better footing in this regard.
Just recently, NZ Finance Minister Bill English remarked that the Brexit may increase the attractiveness of the Kiwi, as credit rating agencies have been positive on their economy and government. However, he did mention that the RBNZ has room to cut rates if the Brexit has negative repercussions on the global economy.
Meanwhile, RBA officials haven’t commented on whether or not they’re considering cutting rates to keep the economy supported after a Brexit. Gold prices have been climbing, supporting the positively correlated Australian dollar as well.
By Kate Curtis from Trader’s Way