AUD/NZD just broke a key support level this week!
In case you missed it, the New Zealand dollar was one of the weakest currencies last week after a slower-than-expected CPI report encouraged speculations of the RBNZ following its peers by ending its rate hike cycle too.
AUD, which also took hits from risk aversion, still managed to gain pips on NZD though. In fact, AUD/NZD traded above a trend line support for most of the week.
AUD/NZD 1-hour Forex Chart by TradingView
But that was last week.
AUD/NZD not only broke its trend line support since then, but it’s also currently trading below the 1-hour chart’s 100 and 200 SMAs.
Are we looking at a legit downside breakout?
It could be that traders are pricing in lower inflation numbers from Australia.
See, markets expect the report to reflect further deceleration in quarterly and annualized consumer prices in Q1.
If we do see a slower CPI, then there would be even fewer reasons for the Reserve Bank of Australia (RBA) to go back to its rate-hiking ways.
In case of a CPI slowdown, you can short AUD/NZD to the 1.0800 psychological level or the 1.0790 inflection point.
If you think that AUD/NZD’s breakout is legit but that AUD will see some more buying before making new weekly lows, then you can consider selling at the post-breakout pullbacks.
I’m eyeing the 1.0870 Pivot Point and 100 SMA levels as it’s also near the broken trend line support, but I’m not discounting some selling at the 1.0850 minor psychological level.
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