Nice Double Bottom on AUDNZD

As we have been discussing for months, both the Australian economy and the New Zealand economy are heavily dependent on the Chinese economy. Not to sound like a broken record, but China is a large importer of goods and services from both Australia and New Zealand. So, if China’s economy slows, demand for goods and services will slow as well. We first began discussing this issue in the Fall of 2019, as the US-China Phase One negotiation was in full force. Once Phase One was agreed, and finally signed on January 15^th, news began to spread of the Coronavirus. Just as traders thought these two economies were out of the woods, these new fears developed for both Aussie and Kiwi traders.

On November 7^th, 2019, AUD/NZD put in a high at 1.0865 and traded down to a low of 1.0361 on January 7^th. Price bounced, then tested that low once again on January 24^th. Again, price bounced. After putting in indecision candles on Thursday and Friday, price gapped open lower today and began traded higher, forming a large bullish candle. In doing so, price broke through the most recent highs at 1.0459, therefore forming the neckline of a double bottom price formation. The target for a Double Bottom is the distance from the bottom to the top of the formation, added to the breakout point. This would put the target just about 1.0600. To get there though, price would have to break through immediate horizontal resistance at 1.0472 and the 200 Day Moving Average at 1.0553. In addition, price would need to break both the 38.2% Fibonacci retracement and the 50% retracement levels from the highs on November 7^th to the lows on January 7^th at 1.0521 and 1.0587, respectively. Don’t be surprised if price doesn’t move in a straight line to target!

Source: Tradingview, FOREX.com

On a 240-minute timeframe, price and RSI are diverging on a rising wedge pattern. When price puts in 3 new highs in a row and the RSI puts 3 lower highs in a row, this is often referred to as a 3-drive pattern (taught to me by Dale Pinkert). This is a high probability pattern which indicates that price may turn lower soon. (This is another reason price may not run to the target of the double bottom pattern in a straight line). If price does pullback, support is at the bottom trendline of the rising wedge near 1.0400, horizontal support near 1.0365 and the target for the rising wedge pattern near 1.0325.

Source: Tradingview, FOREX.com

The RBA held interest rates steady at 0.75% at their meeting last week, citing strong employment and housing. They bought themselves time to see how the coronavirus plays out. However, they did say that they may cut rates some time in Q2. The RBNZ meets Wednesday. Although expectations were for a cut to 0.75% from 1% at their last meeting on November 13^th, they left rates unchanged. Expectations for this meeting are for the RBNZ to leave rates unchanged at 1%. It will be interesting to see how the board members choose to deal with a possible China slowdown due to the coronavirus. Can they buy time, as the RBA did? Their next Interest rate decision meeting is March 25^th.

StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Please ensure you fully understand the risks involved by reading our full risk warning.

FOREX.com is a trading name of StoneX Europe Limited, and FOREX.com/ie is a domain operated by StoneX Europe Ltd, a member of StoneX Group Inc. StoneX Europe Ltd, is a Cyprus Investment Firm (CIF) company registered to the Department of Registrar of Companies and Official Receiver with a Registration Number HE409708, and authorized and regulated by the Cyprus Securities & Exchange Commission (CySEC) under license number 400/21. StoneX Europe is a Member of the Investor Compensation Fund (ICF) and has its registered address at Nikokreontos 2, 5th Floor, 1066 Nicosia, Cyprus.

StoneX Europe Limited is registered with the German Federal Financial Supervisory Authority (BaFin). BaFin registration ID: 10160255

FOREX.com is a trademark of StoneX Europe Ltd, a member of StoneX Group Inc.

The statistical data and the awards received refer to the Global FOREX.com brand.

This website uses cookies to provide you with the very best experience and to know you better. By visiting our website with your browser set to allow cookies, you consent to our use of cookies as described in our Privacy Policy.

Through passporting, StoneX Europe is allowed to provide its services and products on a cross-border basis to the following European Economic Area ("EEA") states: Austria, Bulgaria, Croatia, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden.

Additionally, StoneX Europe Ltd is allowed to provide Investment and Ancillary Services to the following non-EU jurisdiction: Switzerland.

StoneX Europe Ltd products, services and information are not intended for residents other than the ones stated above.

Tied Agent Information: KQ Markets Europe Ltd with Company No. HE427857.
Address: Athalassas 62, Mezzanine, Strovolos, Nicosia Cyprus.
Services Provided: Reception and Transmission of Orders.
Commencement Date: 06/12/2022
Website: KQ Markets - CFD Trading | KQ Markets

We may pay inducements, such as commissions or fees, to affiliates or third-party introducers for referring clients to us. This is in line with regulatory guidelines and fully disclosed where applicable.

StoneX Europe Ltd may make third party material available on this website which may contain information included but not limited to the conditions of financial markets. The material is for information purposes only and does not contain, and should not be construed as containing, investment advice and/or investment recommendation and/or an investment research and/or an offer of or solicitation for any transactions in financial instruments; any decision to enter into a specific transaction shall be made by the client following an assessment by him/her of their situation. StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.