Australian economic data boosts the AUD/NZD pair
If the AUD/NZD price can continue its forex climb and clear the top of its current flag pattern, it could be well on its way to targeting the flag above 1.1000.
Today during the Asian time zone, Australia released stronger economic data which gave a boost to the AUD/NZD pair. The new November CPI monthly indicator showed that inflation rose from 6.9% in November to 7.3% in December. The higher inflation data helped reassure investors that the RBA will raise rates another 25 basis points at its Feb. 6 meeting.
Additionally, Australia has released its retail sales for November. The press showed an increase of 1.4% against an expectation of just 0.6%. This is the largest increase since January 2022. The October reading was also revised up from -0.2% to +0.4%. Retail sales have now been positive for 10 months. This positive news for the Aussie comes after China announced the end of its zero-Covid policy, thus reopening the Chinese economy.
Australia exports a lot of products to China, so a reopening of China is also good for Australia. One of the goods China traditionally imports from Australia is coal. However, a ban on Australian coal has been put in place after the country (along with other countries) called for an investigation into the origins of Covid. China recently suggested a partial end to the coal ban, another forex win for the Aussie.
The AUD/NZD pair rose in the forex for most of 2022. Between late April and mid-September, the price moved up in an ascending wedge formation. The expectation is that the price will move down from an ascending wedge as the price approaches the high. However, AUD/NZD price broke above the price pattern to reach a high of 1.1480 which turned out to be a false breakout. The pair has moved back inside the wedge and moved lower. The target for a break of an ascending wedge is a 100% retracement, which was 1.0825.
The course of the couple AUD/NZD it fell to this level in less than two months and went on to hit a 2022 low at 1.0471 on December 16. Since then, the AUDNZD price has rebounded from the 38.2% Fibonacci retracement level from its 2022 highs to lows near 1.0860 and has hovered around this area since last week.
AUDNZD daily chart
On the 4-hour chart, the AUD/NZD pair appears to be stuck in a flag pattern despite today’s supply. The price is expected to break out in the same direction as the previous move in the flag, which is higher in this case. The target is the length of the tree added at the breakout point, near 1.1050. The first resistance is seen on the upper trend line of the flag near 1.0880. Above this, the AUDNZD could move to the 50% Fibonacci retracement level of the 2022 high to the low at 1.0981 and then the 200-day moving average at 1.1008.
Above, the price could move towards the 61.8% Fibonacci retracement level from the same time frame at 1.1101. However, if the price falls, the first support is found at the bottom of the flag near 1.0802. Below this, AUDNZD could reach 29 December 2022 lows of 1.0624 and then 2022 lows of 1.0471.
AUD/NZD 4-hour chart
The AUD/NZD pair has been in an uptrend in the forex pair since hitting its 2022 low on Dec. 16, 2022 at 1.0471. The pair received another boost today as Australian economic data was stronger than expected. Will the AUD/NZD pair continue to rise?
If the pair can clear the top of its current flag pattern, it could be well on its way to targeting the flag above 1.1000.
By Joe Perry, CMT, FOREX.com » Official site
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