RBA Maintains Rate At 4.25%, AUD/NZD Finds Support

The Daily Chart of the AUD/NZD shows that the market had achieved a range breakout target at 1.2835 last week. This was also the pivot and high during Sept. 2011. A min-bounce occurred, but as we can see in the daily chart, the market is respecting the previous consolidation support and the 200 day simple moving average as resistance.

The Reserve Bank of Australia (RBA) was expected to cut the official cash rate from 4.25% to 4.00% but DID NOT do so.

The daily chart above shows a bullish divergence and thus a short-term rally can be expected especially with the non-cut. However, will the market be able to reverse the bearish momentum set since the market has falling below the 1.3055 pivot, or will the market pullback to retest the 1.3055 level as resistance again. Let's take a look at the 4H chart.

The 4H chart shows that the market has persistent bearish momentum as the RSI reading has remained below 60 with ability to tag 30. However the surprise non-cut by the RBA brought a strong initial AUD-positive reaction. The 4H candle immediately pushed high to claim a new high for this week, engulfing the downswing started this week so far. The RSI is also now testing 60 again, with a break above signaling loss of bearish momentum.

This rally has a first target near a psychological pivot at 1.30. Also a reversion back to the mean in this 4H chart suggests a pullback toward its 200 SMA, which is just above 1.30 at the moment. If price can be maintained above 61.8% retracement of this reaction through the Asian-European session, we are likely to pull back to 1.30, with possibility of pushing to 1.3050. Let's see if 1.30 or 1.3050 can provide resistance. Otherwise, we are looking at a market that has reversed and would attempt a rally toward 1.3270.