AUD/NZD is a cross which is not really heavily traded, but it’s time for a turn and traders should be paying close attention to this pair.
The reason for it is the recent break out and the ranging higher of the pair.
Tony Abbot has taken to the Australian economy in an effort to boost the economy. With the so called “age of entitlement” coming to an end, he has put the pinch on Aussie beneficiaries and pensioners. Either way markets are taking notice of his aggressive right-wing actions.
While across the Tasman Sea, New Zealand is starting to predict a fall in commodity prices, this is a concern for an economy which focuses on primary industries. Nevertheless, the RBNZ is lifting rates in an effort to fight a housing bubble that has been plaguing the economy for some time and this Wednesday will see a likely rate rise to 3.25%. Personally, I feel this has been well priced in by the markets, especially given that current swap rates are pointing to 4% by the year's end. It will be more about what the RBNZ says tomorrow than there actual actions, as people start to fear that a slowing of interest rate rises may be on the card, and instead we may see more exotic actions to control the housing problem.
The sky does look a bit like the limit though when we take into considerationhow far it's fallen.
The current weekly chart shows a dramatic fall for the AUD/NZD which has recently found a double bottom and is looking to trend its way back upwards. All indicators on the weekly are bullish and there is a lot of room above for this pair to climb.
The daily chart is what's key for future decision making, and it’s certainly looking bullish. We can see that the trend lines over the past months have started to accelerate upwards as markets look to push this pair higher. Additionally the Stoch and RSI are both incredibly high, as markets are looking to find further momentum in this pair, and I believe they will find it tomorrow with NZ raising interest rates.
Current resistance levels are at 1.1023 and 1.1208, these are expected to be tested in the coming weeks and I expect to see markets push through them. A tell-tale sign of market pressure is that the current bearish candles show deep wicks, which points to markets taking advantage to buy heavily on brief dips.
All in all, the AUD/NZD is presenting itself as a great opportunity and markets will be looking forward at this and no doubt want further action to extend the bullish run that is slowly taking place. Further market movements may struggle at 1.1208 but it looks likely that the market will hold up much longer at its present rate.