AUDNZD: Turning Higher off 200-Day MA Support near 1.0900?

After seeing a massive downtrend throughout 2011, 2012, and 2013, AUDNZD is finally showing signs of stabilizing this year. For the first half of the year, the pair consolidated within the 375-pip range from 1.0550 to 1.0925, forming a potential base for a longer-term rally. Then, in July, the pair broke up into its next 375-pip range, where rates have been consolidating between previous-resistance-turned-support at 1.0925 and 1.1300 for the last four months.

Over the last few weeks, AUDNZD has pulled back to the strong support at the bottom of the range, which is further strengthened by the rising 200-day MA at 1.0913. The drop to support has certainly piqued bulls’ interest, and upon further inspection, there are other technical reasons for buyers to consider stepping in around current levels.

For one, prices carved out a small Bullish Pin Candle*, or hammer formation, off the 1.0925 support level yesterday. This candlestick pattern shows an intraday reversal from selling to buying pressure and is often seen at meaningful market bottoms. Combined with today’s pending break of the three-week bearish trend line, the price action clearly favors the bulls. While the lagging MACD indicator is still trending lower, there was a small bullish divergence in the RSI indicator over the last week, suggesting that the selling momentum is waning around this key support level.

From the bullish perspective, perhaps the most interesting characteristic of AUDNZD is the well-defined support level: if rates drop through previous support and the 200-day MA in the 1.0900-25 zone, it would erase the near-term bullish bias and point to a larger pullback toward 1.0800 or 1.0700 heading into next year. However, if this support area holds (as the current technical evidence suggests), AUDNZD could easily bounce back toward 1.11, 1.12, or even the range high at 1.1300 in time.

• A Bullish Pin (Pinnochio) candle, also known as a hammer or paper umbrella, is formed when prices fall within the candle before buyers step in and push prices back up to close near the open. It suggests the potential for a bullish continuation if the high of the candle is broken.