AUDNZD could be exhausted from its climb, as the pair is forming a classic reversal pattern in the form of a head and shoulders formation on its hourly time frame.

The pair is already testing the neckline around the 1.1065 mark, and a break lower could set off a drop that’s the same height as the formation or roughly 100 pips. However, the 100 SMA is still above the 200 SMA to suggest that the path of least resistance is to the upside or that support is more likely to hold than to break.

Stochastic is heading down to show that sellers still have the upper hand, and the oscillator has a bit of room to slide before reaching the oversold region to reflect exhaustion.

RSI also has some ground to cover on its move south before indicating oversold conditions, so AUDNZD could keep following suit and possibly dip to the next floor around the 1.1000 major psychological mark.

AUDNZD could take cues from Australia’s GDP report due midweek, as a softer growth figure or surprise contraction could mean sharp downside for the currency. After all, trade and spending have weakened in the previous quarter while businesses anticipate slower commodity demand on account of US tariffs on China.

Note that the Reserve Bank of Australia cut rates in their previous policy meeting and cited scope for more easing, depending on how future data turns out. Retaliatory trade measures from China could prompt even more tariffs from the US, potentially leading to additional downside on Australia’s export activity in the coming months.

Meanwhile, it’s also worth noting that the Reserve Bank of New Zealand recently cut rates as well but noted a more gradual pace of easing moving forward. This economy could be less vulnerable compared to Australia in the event of global trade shocks.