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AUDNZD Pullback Likely as Rising Wedge Breaks Down

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The AUDNZD has been on a tear in recent weeks. Since September 14th, which was a seventeen-month low for the pair, the Aussie cross has gained an impressive 450 pips.

However, the rising wedge on the 4-hour chart indicates that the current rally is reaching a point of exhaustion at least in the near-term. This idea makes sense given Friday’s retest of the 1.0750 handle, a key pivot that dates back to December of 2013.

With that said, I wouldn’t bank on a significant pullback here. Although the pair has struggled since March of 2011, the sideways price action over the last two and a half years suggests a more neutral bias.

Combine that with the four-week rally, and it seems we’re more likely to see a mild pullback than an aggressive selloff.

So where to from here?

If sellers can follow through on today’s break of wedge support, we could very well see a move toward the 1.0580 handle. The level acted as resistance in late September before flipping to support earlier this month.

I could give additional areas of support below 1.0580, but I’m not anticipating an extended move lower from current levels. Note that the recent highs at 1.0633 could also give sellers fits on the way down.

There are a few upcoming events that will affect both currencies including a speech by RBA Governor Lowe at 5:10 pm EST followed by New Zealand CPI at 5:45 pm EST. Then at 8:30 pm EST we have Australia monetary policy meeting minutes.

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