We have been analyzing the commodity currencies fall from grace since the global sell off began a mere 2 weeks ago. The AUD which had been trading very bullish against the Greenback since early February has plummeted through the 50, 100 and 200 day MA's. We commented that .8625 was holding key Support as it represented the AUD's prior major low, as well as a bounce off the 200 day MA. Below a major level of Support is typically where Stops on a losing long position are placed and often where speculators will open new Shorts. Look at yesterday price action as the Aussie dropped more than 2 big figures. Lastly, the major MA's are beginning to converge and often a currency will attempt a surge back, only to fall further when a major cross occurs. For now we are in the early stages of a negative bias forming on the AUD's ability to recover in the short run and that more negative price action may like follow.
The NZD and AUD tend to trade in tandem as they account for each others largest import and export business. Furthermore, both countries have historically maintained high interest rates, thereby accounting for similar capital investment and risk cash flows. The NZD under went months of consolidation and now the MA's are finally coming into line with falling prices as the 200 sits above the 100 and the 100 above or just equal to the falling 50, as price depreciation accelerates. Price action fell through support near .6830 and the bottom fell out. This obviously signals potentially more weakness to come for the Kiwi.
There is no doubt the Canadian Dollar is holding the most strength against the Greenback as compared to its sister currencies. As a matter of fact, the only technical saving the AUD and NZD right now is the CAD. These pairs all trade with a positive correlation and gain strength and weakness from each others moves as they react to underlying asset or commodity price action. In this case the CAD is refusing to close above the 200 day MA which is holding very firm Support near 1.0480. Traders are watching this carefully as a close above the 200 day MA coupled with weakness from its sister currencies may put an end to the CAD run. There are most likely stops north of the 200 MA, and speculators adding short CAD positions above that level could trigger major price action with a breach. It would also be last the technical keeping the commodities currencies afloat.
bforex is a world leading foreign exchange broker established on an entrepreneurial vision to provide FX traders with simple and intuitive interaction with the Forex market. We are highly valued by our customers due to our expertise in providing traders with unrivalled execution speed, 24 hour assistance, tight spreads, superior exchange rates, commission free trading and a cutting-edge trading platform.
If you don't know where to start, start here! Don't be afraid to ask questions.
4 posts • Page 1 of 1
- rank: 50+ posts
- Posts: 93
- Joined: Sat Mar 15, 2008 2:30 pm
- Reputation: 0
- Location: Davy Jones' Locker
Price action fell through support near .6830 and the bottom fell out. This obviously signals potentially more weakness to come for the Kiwi.
I disagree. It looks a classic bullish flag to me.
- NZDUSD.png (12.13 KiB) Viewed 221 times