AUD/NZD: Bounce potential off 1.0900 support
City Index October 7, 2015 1:57 AM
<p>As we noted earlier today, the Australian dollar is edging higher on the slightly less-dovish-than-expected RBA statement, driving AUD/USD into resistance in the mid-.7100s (see […]</p>
As we noted earlier today, the Australian dollar is edging higher on the slightly less-dovish-than-expected RBA statement, driving AUD/USD into resistance in the mid-.7100s (see “AUD/USD above .7100 after optimistic RBA, but medium-term downtrend intact” for more). As you would expect though, the strength in the Aussie is impacting more than just AUD/USD; in fact, AUD/NZD is also bouncing from a critical support level.
For nearly four months now, the antipodean pair has been clearly rangebound in the 500-pip range from 1.0900 to 1.1400 as traders weigh the relative monetary policies and economic indicators from the two closely-related countries. Of late, the kiwi has been the top dog, with AUD/NZD falling from the top of its range above 1.1300 down to test the bottom of the range at 1.0900 yesterday. That said, today’s RBA meeting may start to tip the scales back across the Tasman.
From a technical perspective, today’s candle is not particularly impressive as of yet, and the secondary indicators are mixed. The lagging MACD indicator is predictably showing bearish momentum by trending lower beneath both its signal line and the “0” level, though the RSI is testing its previous support level at 35.
Economic data in the coming week may be the biggest determinate of whether we’re still discussing this range at Halloween. This Thursday brings AU Home Loan data, a figure that the RBA has pointed to as a strong section of the economy, while next week will reveal the latest data on AU Business Confidence (Monday) and Employment (Wednesday), as well as NZ CPI data (Thursday).
As it currently stands, a bounce from support at 1.0900 would appear most likely after the big drop from the top to the bottom of the range. However, if the 1.0900 level gives way, a move all the way back down toward 1.0600 is possible later this quarter.
StoneX Financial Ltd (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.