Market News & Analysis

Top Story

Antipodean FX revival to continue

The U.S. dollar index, the DXY is on course for its biggest monthly fall since January 2018. Hopes of an end to Brexit, the U.S. – China trade truce and an expectation that the Federal Reserve will cut rates again next week have all played a part in undermining support for the U.S. dollar.

Factors closer to home have also contributed to the revival of Antipodean FX pairs the AUDUSD and the NZDUSD.

Our short-term bullish view of the AUDUSD has been in place since early October. It was aided last week by a better than expected Australian employment report and upbeat comments from RBA Governor Lowe during a speech to the IMF that included the economy is “gradually improving” and that the prospect of negative rates in Australia is “extremely unlikely.” The latter goes against the view of many prominent economists who expect the RBA to use unconventional monetary policy to support the Australian economy next year.

In New Zealand, last week’s Q3 Consumer Price Index (CPI) data has provided some support for the beleaguered NZDUSD. Although the headline rate fell further to 1.5% y/y, the 0.7% rise in Q3 and the larger than expected rise in domestic (non-tradable) inflation to 3.2%, driven by housing-related price gains, were both stronger than expected.

The technical picture also supports the subtle shift in the macro narrative for the NZD vs the U.S. dollar.

The monthly chart immediately below confirms the recent .6204 low was made in the vicinity of long-term uptrend support coming from the .3901 low from October 2000. It was also in the area of horizontal support from the August 2015, .6197 low.

Antipodean FX revival to continue

The daily chart below reveals an inverted head and shoulders bottoming pattern, bullish divergence via the RSI and a possible Elliott Wave, 5th Wave low in place at .6204.

Antipodean FX revival to continue

In summary, after breaking above the neckline of the inverted head and shoulders .6355/65 area, the NZD is well-positioned to make further upside progress against the U.S. dollar. Dips should be well supported back to .6370/60ish and the initial upside target for the NZDUSD is the .6450 high from September followed by the confluence of resistance .6480/.6500 that includes the inverted head and shoulders target.  

Source Tradingview. The figures stated areas of the 21st of October 2019. Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation


TECH-FX TRADING PTY LTD (ACN 617 797 645) is an Authorised Representative (001255203) of JB Alpha Ltd (ABN 76 131 376 415) which holds an Australian Financial Services Licence (AFSL no. 327075)

Trading foreign exchange, futures and CFDs on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange, futures or CFDs you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss in excess of your deposited funds and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange, futures and CFD trading, and seek advice from an independent financial advisor if you have any doubts. It is important to note that past performance is not a reliable indicator of future performance.

Any advice provided is general advice only. It is important to note that:

  • The advice has been prepared without taking into account the client’s objectives, financial situation or needs.
  • The client should therefore consider the appropriateness of the advice, in light of their own objectives, financial situation or needs, before following the advice.
  • If the advice relates to the acquisition or possible acquisition of a particular financial product, the client should obtain a copy of, and consider, the PDS for that product before making any decision.
Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.