Market News & Analysis
Trump cheer supports AUDNZD
Tony Sycamore August 14, 2019 12:49 AM
A decision overnight by President Trump to delay the imposition of new tariffs on a wide variety of consumer products including laptops, smartphones and children’s toys until Mid-December has boosted risky markets after a shaky start to the week.
Whether the tariff delay signals that the odds of a trade deal have improved after senior officials held their first phone conversation since the war escalated in early August it is hard to say. Potentially the tariff rethink comes after White House officials convinced Trump the new round of tariffs hurts the U.S. more than it does China.
The temporary thawing in relations has attracted buyers back into the commodity markets. Crude oil futures rallied almost +4% to end the day back above U.S. $56.00 while copper futures closed almost +2% higher.
After a -30% fall over the last six weeks, much needed support has returned to the price of iron ore. The SGX active iron ore futures contract closed at $89.25, up +2.8%, and Dalian futures closed +2.15%. Further support will come from a Goldman note that said with the iron ore market “in a deficit, prices have to rise”.
This brings me to the subject of today's note, the AUDNZD cross which has staged an impressive rally since the RBNZ cut rates last week.
As can be viewed on the chart below, AUDNZD, has broken and closed above the trend channel it spent the past four months trading within. In Elliott Wave terms, the decline from the 1.0732 high to last week’s 1.0264 low is viewed as a corrective pullback (wave b of an irregular “abc”). This suggests the current rally can extend towards the April, 1.0732 high.
I favour building a small long position at the current price of 1.0520 with a sell stop placed at 1.0425. Assuming the trade is still live after tomorrows Australian labour force data and AUDNZD has maintained its break above the trend channel, I will look to add to the position and raise the stop loss up to 1.0445. The target for the trade is 1.0720/30.
Source Tradingview. The figures stated are as of the 14th of August 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.
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.