Chart of the Day: AUDNZD
Thursday’s Aussie employment data is the key, as the market is expecting solid numbers amid a backdrop of deteriorating global economic conditions.
Let’s take the global story out of the equation to an extent, and look at AUDNZD. In Australia, last week we saw that the cash rate was kept unchanged, and the Reserve Bank of Australia seemed in no rush to hike. While there are clear weak areas of the Australian economy, the combination of a pause from the RBA and somewhat better retail sales and inflation has seen the AUD outperform the kiwi.
In NZ, last week we saw the Reserve Bank of New Zealand move ahead of the curve, aggressively cutting by 50bp to stimulate the economy, with a draft New Zealand Treasury report talking about potential moves into -35bp. We’ve even seen central bank talk about unconventional monetary policy, and the result is increasing policy divergence at a central bank level.
AUDNZD confirmed a double-bottom reversal from its lows at 1.0263, with the current move resulting in a break above the long-term downtrend channel from April’s highs. A critical point, indeed, with the price halting at 50% Fib level of the current downward range and just shy of 200-day SMA at 1.0517 mark.
Keep an eye on tomorrow’s Q2 wage data (consensus unchanged at 2.3%), although Thursday’s July employment data (consensus 14,000) at 02:30 BST will be the event risk. Any surprise in the figures — positive or negative — could attract significant moves in the pair.
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