AUD/NZD rebounded after finding support at 1.0930

AUD/NZD

The dollar traded mixed against its G10 peers during the European morning Wednesday. It was higher against AUD, NZD and JPY, in that order, while it was lower vs GBP, CHF and EUR. The greenback remained stable against CAD, NOK and SEK.

The Bank of England’s monetary policy committee (MPC) voted 7-2 on whether to leave interest rates on hold, according to the minutes of its November policy meeting. The majority in favor of keeping the current stance had a “material spread of views” on the balance of risks to the UK’s outlook of growth and inflation. This showed split among the views of the seven members who voted to keep rates at 0.5%. While some of those views were focused on the possibility of weaker growth, other MPC members mentioned the potential for slack to be eroded faster than currently expected adding upward pressure on prices. Martin Weale and Ian McCafferty continued to justify an immediate rise in Bank rate and attributed the low CPI to the higher exchange rate and the lower raw material prices. GBP/USD surged following the minutes release but remained below our 1.5730 resistance zone. However, even if we see the rate breaking above that line, I will stick to the view that the overall trend remains to the downside and I would treat any possible upside extensions of this bounce as a corrective move.

The New Zealand dollar weakened after dairy product prices fell at the latest auction to the lowest level in more than five years. This raised worries that the country’s largest exporter of dairy products could lower its milk payout forecast, eroding the income of farmers and putting NZD under selling pressure.

AUD/NZD rebounded after finding support at 1.0930 (S1) on Tuesday to hit resistance at 1.1015 (R1). During the European morning Wednesday, the pair moved in a consolidative manner, staying below that resistance hurdle. On the 4-hour chart, the price structure remains lower peaks and lower troughs below the black downtrend line taken from the high of the 31st of October, and below both the 50- and the 200-period moving averages. This keeps the near-term outlook to the downside and I would expect another test at the 1.0930 (S1) line in the not-to-distant future. On the daily chart the pair seems to have been printing a triple top pattern which is however not completed yet. In my view, a dip below the support line of 1.0910 (S2) is needed to signal the completion of the formation and set the stage for larger bearish extensions.

• Support: 1.0930 (S1), 1.0910 (S2), 1.0830 (S3)

• Resistance: 1.1015 (R1), 1.1080 (R2), 1.1155 (R3)