By: Mike Kulej
In the aftermath of the earthquake in New Zealand, the country’s currency became significantly weaker in relation to others. In some cases, this was simply a continuation, or acceleration of already existing trends. One of the best examples is the AUD-NZD pair.
Not that long ago, at the end of December, the AUD-NZD made a new decade high at 1.3510. That was followed by a deep correction to 1.2773, from where the rally resumed. Now the price is once again flirting with the multi year high, touching 1.3500.
Moving Forward
This process of change was very rapid and at a steep angle, which left the technical indicators behind. They are moving as fast as the price and forming possible divergences, particularly visible on the MACD and the RSI graphs. This, in turn, suggests that the AUD-NZD could be overbought, at least short term.
To be sure, the divergences are not in place just yet. For that, the price must at least touch the previous high. However, under the circumstances, the general 1.3500 area should be viewed as a possible correction zone, especially if a new high is made. That would make divergences official and could start a sizeable pull back in price.