The RBNZ had a bit of a dovish hike today, but can this channel resistance on AUD/NZD still hold?
Even though the central bank increased interest rates by 0.25% as expected, policymakers actually considered keeping policy unchanged in this meeting.
As it turns out, weaker business demand conditions and slowing global inflationary pressures led some to rethink their tightening plans.
Not surprisingly, this led to a sharp drop for the Kiwi across the board. But how long will the selloff last?
On the hourly chart of AUD/NZD, you can see that the pair has formed lower highs and lower lows connected by a descending channel that’s been holding all month of May.Thanks to the RBNZ surprise, price is now closing in on the top of its channel, which happens to line up with R1 (1.0710).
Technical indicators are still pointing to a continuation of the slide, as the 100 SMA is below the 200 SMA to indicate bearish pressure.
Stochastic is on the move up but is closing in on the overbought region to reflect exhaustion among buyers soon. Turning lower would confirm that Aussie bears could take over and drag AUD/NZD back down to the channel support near S1 (1.0530).
Now this pair moves an average of 70 pips per day, so it might not go far past the channel top before Kiwi sellers book profits.
I’d be careful if AUD/NZD busts through the 1.0750 minor psychological barrier, though, since this could pave the way for a move up to R2 (1.0830) or higher!
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