Recently there has been a somewhat unusual occurrence in the market. The AUD/NZD has reached oversold on the monthly, weekly, daily, and H4 chart all at the same time. Obviously the AUD outlook is bleak, while the NZD economy has been strong and considering rate hikes. But it is unusual to have 2 commodity currencies at such a strong divergence. It would be reasonable to see one dragging the other down. But that has certainly not been the case with this pair. Since March of 2011 the pair has been on a downhill slide from 1.37916. Since July of 2012 it has been a straight march down from 1.30777 to 1.05399 a fall of 2537 pips. The market for all its ups and downs likes balance. No pair is further out of balance than these two. I am not trying to conclude the drop down is done yet, but rather at some point the market is going to find a balance. This could be a NZD dragging down against other pairs with the AUD, or the AUD going back up against the NZD only, or both. From a long term traders point of view, this might be a great time to long the AUD/NZD. The only certainty is the market will find balance, eventually.
OK The weekly Stochastic isn’t technically over sold on this chart, but RSI is. I was just trying to maintain continuity with the charts.
