Antipodeans vulnerable to deeper declines: AUD/USD and NZD/USD
Tony Sycamore March 24, 2021 3:17 AM
A central thematic during the first quarter of 2021 was the passing of Joe Biden’s stimulus package that prompted significantly higher bond yields with ramifications for other asset classes.
For FX markets rising yields created an environment where traditional low-yielding currencies such as the JPY and the EUR have underperformed and where commodity currencies including the AUD/USD and NZD/USD have done well. A reflection of the expectation of higher commodity prices.
However, news yesterday (flagged very early on via the City Index Twitter handles) that the NZ government had announced a package of changes to address housing affordability saw a dramatic shift in sentiment.
Surging house prices have been a point of friction between the RBNZ and the government for many months. The new measures saw the front end of the rates curve reprice sharply lower, as expectations of OCR rate hikes were pushed out, weighing on the NZD/USD.
There haven’t been too many “free hits” in FX this year but the housing news combined with a break of year-to-date lows and crucial support near .7100c was certainly a nice opportunity in a friendly time zone.
The AUD/USD already under suspicion due to talk that demand from China for key commodities was falling, wasted little time playing catch up. Helped along by news in the afternoon that China was considering releasing aluminium from its state reserves.
The break of .7700c was a negative development as highlighted in an article here last week.“ to keep the short-term upside momentum intact, the AUD/USD has no right trading below .7700c.”
Furthermore, following this morning’s break of the March .7622 low, risks have increased for a deeper corrective pullback towards medium-term support .7500/.7450 area where signs of basing should be watched for.
For the NZD/USD, the technical picture is similar. Yesterday’s break below support near .7100c, warns that a deeper correction is underway targeting a move towards the 200 day moving average at .6850ish. Once again signs of basing will be watched for as an indication the correction is complete and the uptrend has resumed.
Source Tradingview. The figures stated areas of the 24th of March 2021. 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
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