There is a significant unbalance in current AUD drop against NZD (1450 pips since 04/05/2011). If we look at a current individual performance of a pair against USD it’s notable that for a same period AUD dropped cca. 260 pips while NZD gained 630 pips. Even if we attempt to add “one for one” these numbers, a sum would come to about 890pips – about 560 pips differential from 1450 that experienced a drop in pretty much a straight manner!
Since my favorite “odd couple” (AUDNZD) have shown anything but “rational market behavior” (if such a term makes any sense at all) in last 2 years, where I got my fingers burned on about 3 out of 4 occasions, I will try to use my crystal ball and predict where this drop will end-up and what a potential pullout may look like?!
If we ignore a crash of autumn 2008, parallel lines may be drawn starting 13.12.07/15.07.10 at the bottom of a channel and 29.07.08/07.03.11. As you can notice from a chart bellow, the latest Aussie drop from 1.365 back in 10.May.11 is ending pretty soon at a support channel line (probably as soon as this week).
From that point, it’s reasonable to expect a smaller rebound up to 1.27-1.28 where 1.28 may act as a resistance (former support) line.
After a rebound, 2 scenarios may happen:
a) Testing a resistance channel line as part of a larger uptrend (bullish Aussie)
b) Break of a trend line and test of a major support at 1.22 area.
Short term:
While 240min chart RSI still shows no signs of divergence (1.300 high from a beginning of July still under no signs of treat), 60 min one shows a mild divergence.
One may enter a small “gamble" trade with a tight stop right now @ 1.2550 level (tight stop in a context of this pair means 50 pips!) while I would personally rather wait ‘till Wednesday to see if further decline of about 100 pips daily will happen. Note from a daily charts that first area of interest is 1.245 where two channels are colliding (current bearish and long term Aussie bullish).
Good luck with trading and don't forget a stops ;)
Sasalex_fx
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