Minors and Exotics Trading Charts

AUDNZD shrugs off kiwi unemployment beat

AUDNZD is moving back into its higher range, approaching multi-month resistance around 1.0830. The Australian dollar has gained despite the RBA’s downward revision of its economic outlook yesterday. The currency continues to be traded as a global risk proxy more than a response to domestic affairs.

Victoria’s lockdown has cast more uncertainty over Australia’s economic recovery. The RBA yesterday revised its unemployment forecast, which it now expects to reach 10 percent. Its expectations for an economic bounceback in 2021 has been revised down from a seven to a five percent rebound. The central bank also announced it would ramp up its QE program, purchasing more Australian government bonds to bring rates back in line with targets.

Despite a more cautious central bank, the AUDNZD pair is partly a story of central bank divergence. The RBNZ is relatively more dovish. Its QE program is currently capped at NZ $60bn and has asked domestic banks to prepare for the possibility of negative interest rates next year. The central bank has made clear more easing is possible as required.

New Zealand unemployment printed lower than expected this morning, falling to 4% from 4.2%. Consensus expectations had been for an increase to 5.8%. AUDNZD fell briefly on the unemployment beat from above 1.08 to 1.0775 but quickly reclaimed the losses, with an increase in underemployment as well as pandemic wage subsidies likely masking a higher jobless problem in New Zealand.

Meanwhile booming commodity prices continue to support the Australian dollar.

The kiwi has in fact gained on the day so far (NZDUSD up), but AUDSD is gaining at an even faster pace, pushing AUDNZD towards resistance. So will it break higher this time and begin a move into 1.09, or reject the resistance level and sell off?

Sean MacLean

Research Strategist

AUDCAD - exhausted bull trend or a buying opportunity?

Risk aversion kicked in briefly last week and caused a weaker Australian dollar, with a pinbar reversal candle appearing on the AUDCAD daily chart. The bearish signal was followed by a further selloff Thursday but markets settled on Friday, finding support around 0.95150, with the daily chart now posing the question: is this an AUDCAD buying opportunity or is that bull trend exhausted? Here’s why I like AUDCAD.

Rather than the typical trade of Australian dollar in USD terms, I like AUDCAD because it pits one commodity currency against another. AUD price action is largely driven by commodity prices like iron ore, whereas the CAD is a petrocurrency and is largely driven by Western Texas crude (XTIUSD) prices.

From that perspective, we see a booming commodities market where iron ore has risen almost 10% this month alone. Great news for the AUD, the world’s largest iron ore producer, which is also due to pick up business Brazil has lost due to mine closures during covid outbreaks.

But it seems to be a commodity boom that’s leaving oil behind as lockdowns keep millions of people at home and prevent travel. XTIUSD futures have risen a touch this month but have been mostly flat around US $41 per barrel.

Wednesday’s bearish candle on AUDCAD fulfilled its prophecy with a subsequent sell-off on Thursday, but does Friday’s bullish pinbar candle suggest the bull trend is ready to resume? The pair has found some buyers early in the session this morning. Whatever your view, the commodity recovery is worth considering when trading AUDCAD.

Sean MacLean

Research Strategist

Waiting, waiting for oil

Selling pressure persists on USDNOK. The Nordic petro-currency has strengthened a touch since we looked at the pair last week, but any stronger moves continue to be held back by subdued oil prices.

Have a look at the Brent crude (XBRUSD) and you can start to understand why USDNOK is struggling to move lower. It’s mostly an oil play here, and XBRUSD has been trading flat just below the 43.50 handle.

Sure USDNOK has found weekly support at 9.3500 but I’m not sure a close below this level will cause too much excitement until we start to see proper moves higher in oil prices.

The NOK seems to be waiting on the oil market, which has become increasingly cautious as global COVID cases continue to rise and social distancing laws persist. When oil does break higher, expect the NOK to follow. 9.2000 is an immediate support level, but any strong signs from oil markets and this could move even lower.

Sean MacLean

Research Strategist

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