Matt Weller, CFA, CMT
Faraday Research
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. 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.
This research is for informational purposes and should not be construed as personal advice. Trading any financial market involves risk. Trading on leverage involves risk of losses greater than deposits.
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