AUDNZD surged during the Asian morning Wednesday

AUD/NZD

• Forex markets were relatively quiet during the European morning Wednesday, with the dollar trading virtually unchanged against most of its G10 counterparts. The greenback was higher against NZD, EUR and CHF, in that order, while it was lower against NOK.

• The New Zealand dollar extended its overnight loses after the weaker-than-expected inflation data and the additional decline in dairy prices at the latest auction. Chinese 2Q GDP showed better-than-expected growth, however a statement by a person from the Chinese statistical Bureau that problems in the nation’s property sector may exert downward pressure on Chinese growth added to the Kiwi decline.

• As for this morning’s indicators, the unemployment rate in the UK fell to 6.5%, a five-year low, in line with estimates. Nevertheless, Cable weakened at the release of the news as the focus was on the average weekly earnings, which slowed in pace to +0.3% yoy (3 month average) from an upwardly revised +0.8% yoy. The slow growth in wages indicates that there is still spare capacity in the labor market and the Monetary Policy Committee is likely to conclude that there is no urgent need to tighten.

• AUD/NZD surged during the Asian morning Wednesday and extended its advance during the European morning. The rate emerged above the short-term blue downtrend line and broke above the high of 1.0730 (resistance turned into support), signaling a possible short-term trend reversal. Both our momentum studies continued their upside paths, with the MACD crossing above both its signal and zero lines. This designates the recent accelerating bullish momentum, but having in mind that the RSI is likely to exit its overbought zone, I would expect some consolidation near the 1.0730 (S1) zone before the bulls prevail again. All the above provide ample evidence that a near-term trend reversal is in the game with the rate seeing scope for further extensions, probably towards the resistance zone of 1.0830 (R1), first. In the bigger picture, on the daily chart, the price rebounded from the lower boundary of an upside sloping channel, drawn from the highs and the lows of January and alongside our daily momentum studies supports the notion for a forthcoming near-term uptrend. The 14-day RSI is pointing up, ready to move above its 50 level, while the daily MACD has bottomed and moved above its signal line.

• Support: 1.0730 (S1), 1.0700 (S2), 1.0635 (S3).

• Resistance: 1.0830 (R1), 1.0870 (R2), 1.0910 (R3).