Technical Analysis Summary: AUD/USD, NZD/USD

In the recent analysis by Matt Simpson, the focus is on the commodity currencies, particularly AUD/USD and NZD/USD, which have shown signs of potential recovery after a prolonged period of decline against the USD. The analysis highlights several key technical indicators and market conditions that suggest a possible correction is underway.

Market Context

The backdrop for this analysis includes a recent mild risk-on sentiment in the market, influenced by geopolitical developments, particularly trade negotiations between the US and Canada. Despite the overall strength of the USD, commodity currencies have started to show resilience, leading to a potential reversal in their downtrend.

Key Technical Indicators

• Commodity FX Positioning: The analysis notes a multi-month bullish divergence in net-short exposure for CAD futures, indicating a potential shift in market sentiment.
• False Breaks: Both AUD/USD and NZD/USD have experienced false breaks of significant lows, which often precede reversals.
• RSI Divergences: Bullish divergences on the weekly and daily RSI for NZD/USD suggest a potential for mean reversion, while similar patterns are observed in AUD/USD.

NZD/USD Technical Analysis

NZD/USD has shown resilience by avoiding a retest of its 2022 low. The following points summarize the technical outlook:

• A bullish divergence on the weekly RSI indicates potential for upward movement.
• The formation of a bullish hammer candle suggests a reversal pattern.
• Key resistance levels to watch include the October 2023 low at 0.5777 and the high-volume node at 0.5863.

AUD/USD Technical Analysis

AUD/USD has recently broken below its 2022 low but is now trading above this level, indicating a potential recovery. Key observations include:

• The pair has risen for two consecutive days, but the 2023 low may act as a resistance level.
• The 1-hour RSI indicates overbought conditions, suggesting limited upside potential in the near term.
• Support levels to monitor include the monthly pivot at 0.6222 and the high-volume node at 0.6205.

Conclusion

Overall, the technical analysis of AUD/USD and NZD/USD suggests that both pairs may be poised for a corrective bounce after a prolonged period of weakness. Traders should remain vigilant for key resistance and support levels as well as monitor economic data releases that could impact market sentiment.