Forex: AUD/NZD consolidation continues, possible “bear flag” pattern forming?

FXstreet.com (Barcelona) - The AUD/NZD traded in a narrow range for a 3rd straight day, closing the NY session down 22 pips at 1.2225. After falling 2.53% in the previous 4 weeks, the pair appears to be consolidating losses above the key support pivot (1.2180) from February 15th. Earlier in the session, NZD CPI was released coming in at 0.4% (forecast was also 0.4%). Reaction to the print has been quiet thus far.

According to analysts at NAB Global Markets, “The NZ CPI has implications for Australia because the local CPI tends to follow its NZ counterpart. Hence, a further slowing in inflation across the Tasman could be a pointer to the downside risk in Australia.”

From a technical perspective, it appears a “bear flag” pattern may be forming on the daily chart. This is a common consolidation pattern after a particular currency or commodity has suffered steep losses and is oversold from a momentum perspective. A close below 1.2200 would confirm the pattern and possibly open the doors to 1.2000 (measured move price target) and even much lower prices. Keep in mind this is a short term pattern which could continue to form over a number of sessions before actually being confirmed.