AUD And NZD Both Gain While AUD/NZD Moves Lower

The dollar was generally lower against the G10 currencies at midday in Europe in a continuation of the trend following Friday’s weaker than expected non-farm payrolls. With little news to push markets either way, movements were relatively constrained.

The AUD and the NZD both moved higher overnight and continued to rise during the European morning following the weekend announcement of better than expected Chinese exports in August. Subdued inflation in China (falling to 2.6% yoy in August from 2.7% yoy in July) also holds out the promise that the government may not have to dampen growth going forward. China is the biggest trading partner of both Australia and New Zealand. The AUD also benefitted from the release of stronger than expected home loan data for July of 2.4% (vs forecasts of 2.0%). Nonetheless, the NZD slightly outpaced the AUD, and the AUD/NZD moved slightly lower. This was may have been because of the acceleration in New Zealand house price gains to +8.5% yoy in August from 8.1% in July.

The AUD/NZD reversed to a downtrend, after the completion of a “head and shoulders” reversal formation on Thursday. After the completion the pair returned and tested successfully the formation’s neckline before continuing its downward move. At the time of writing AUD/NZD lies between the 1.1469 (S1) and 1.1521 (R1) levels. If the selling pressure continues to push the price lower, I expect it to challenge the 1.1469 level (S1), where a clear downward break should trigger extensions towards 1.1430 (S2). The 20-hour moving average lies below the 200-hour moving average, currently providing resistance for the price.

Support: Support is found at the 1.1469 (S1) level, followed by 1.1430 (S2) and 1.1404 (S3) respectively.

Resistance: Resistance levels are identified at 1.1521 (R1), 1.1540 (R2) and 1.1572 (R3)

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