AUDNZD a brighter outlook

I recently had the pleasure of meeting and talking with several private traders at a wine tasting evening. After the formal part of the evening concluded, talk turned to markets our preferred trades and trading styles. There is always a lot of interest from private traders in the way that professional traders at hedge funds and banks operate.

It’s important to note there are many ways to trade. In the trading room I worked in, the styles of the traders all varied. However, the common ground was that the majority of traders were looking for trade opportunities that married a supportive fundamental outlook with a supportive technical view. Within that framework there were firm risk management guidelines (stop losses) incorporated into any trade as banks and hedge funds are very particular about looking after one of their most prize assets, its capital.

An example of this style of trading is currently on display in AUDNZD.

Firstly, a brief overview of the fundamentals currently in place in Australia. On Tuesday, 7 August the RBA meet and are likely to keep interest rates on hold at 1.50% for a record 23rd month in a row. Australian economic data over the past week has mostly exceeded economists’ expectations including stronger than expected building permits, private sector credit, retail trade numbers, as well as a larger than expected trade surplus in June driven by a strong increase in exports (2.6%M) and a decline in imports (-0.7%M). Notably exports to China performed well despite U.S.-China trade tensions.

In New Zealand, the RBNZ meets on Thursday, 9 August and is expected to leave interest rates on hold at 1.75%. A neutral message is expected to be conveyed in the Monetary Policy Statement (MPS) with slowing growth offset by rising inflation. Economic data in New Zealand has recently been mostly softer than expected examples of recent misses include building permits and business confidence data. Although the recent Labour market data shows employment remains stable at tight levels. New Zealand’s largest export is dairy products, the prices of which have fallen for 4 straight months.

For the time being, the fundamental backdrop between the two countries is supportive of a higher AUDNZD exchange rate.

Turning to the charts, AUDNZD has bounced back above 1.0900 after holding the cluster of support at 1.0855/35 which includes previous lows and the 200-day moving average currently sitting at 1.0854. Additionally, AUDNZD is trading within a trend channel or a flag type pattern which is usually a continuation type set up.

A break and close above the top of the trend channel 1.0950 area would provide some confirmation that the up move has resumed towards recent highs 1.1000 area. Above 1.1000, the next level on the markets radar will be year to date highs 1.1080/1.1120 area. The logical place for a stop loss on the AUDNZD higher view is below the recent lows, 1.0825ish.

Source Tradingview. The figures stated are as of the 3rd of August 2018.  Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

TECH-FX TRADING PTY LTD (ACN 617 797 645) is an Authorised Representative (001255203) of JB Alpha Ltd (ABN 76 131 376 415) which holds an Australian Financial Services Licence (AFSL no. 327075)

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