Aug 19 (Reuters)- U.S. dollar gyrations are grabbing the headlines but on the periphery there is interest in the NZD as it stages a recovery despite a negative central bank backdrop. nL1N2FL0B6
A classic trend-reversal in AUD/NZD is taking shape following the AUD's acceleration into a 1.1043 trend high on Tuesday.
The resulting pullback extended to 1.0946 early on Wednesday and there is a danger the cross will capitulate, triggering a deeper plunge.
Those nursing longs will look to support points at 1.0903, the 10-day moving average, and 38.2%-50.0% Fibonacci retracement levels at 1.0859 and 1.0802.
Despite an improving kiwi technical picture, any subsequent AUD/NZD weakness will be tempered by the fundamental backdrop.
Central bank divergence is likely to dictate terms with an extremely dovish New Zealand central bank and hawkish Reserve Bank of Australia helping underpin AUD/NZD.
The threat of negative NZD interest rates and looming New Zealand elections will limit the NZD recovery.
Australia has its own COVID-19 problems but on balance the adjustment lower in AUD/NZD could offer opportunities for those looking to play the long side.
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