If we were to narrow down our best trade ideas to complete a trade review for the year thus far, AUDNZD would feature prominently as two breakout type trades played out in almost textbook precision.
After AUDNZD last week all but reached the 1.0850 target mentioned in this article https://www.cityindex.com.au/market-analysis/audnzd-trade-receives-a-boost/ we discuss two upcoming tier-one macro events and their implications for AUDNZD, as well as possible levels to rebuy the cross.
The first event occurs tonight as RBA Governor Lowe gives a speech titled “An economic update” at an Armidale Business Chamber dinner from 8:05 pm AEST. Following on from last week’s dovish RBA minutes and the unemployment rate rising to a 12-month high, the market is currently 80% priced for a rate cut to 0.75% at the next RBA meeting on October 1. In this context, a dovish speech tonight is largely priced. The surprise would be if Lowe were to push back against current market pricing.
Then follows the RBNZ interest rate meeting tomorrow at midday AEST. After a surprise 50bp cut in August, the RBNZ is expected to keep the OCR on hold at 1.00% while leaving the door open to further cuts before year-end. Once again, an outcome already priced into markets.
This suggests that AUDNZD is unlikely to see a sharp fall as a result of either of these events – a view which is supported by our Elliott Wave technical analysis. The strong rally to last weeks 1.0840 counts as a minor Wave iii, and the current consolidation is viewed as a minor Wave iv correction.
In terms of how far the Wave iv correction will unfold, initial support resides 1.0730/10 which includes the April high and the four consecutive daily highs in September. Below here 1.0630/20 offers medium-term support including the 38.20% Fibonacci retracement from the August 1.0264 low up to last weeks 1.0840 high.
In short, I am expecting pullbacks in the AUDNZD to be relatively shallow. Should a pullback that displays corrective characteristics take AUDNZD back to 1.0630/20 support area and feature a bullish reversal candle, it will be looked at closely as a buying opportunity in AUDNZD targeting retest of 1.0850.
Source Tradingview. The figures stated are as of the 24th of September 2019. 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
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SEPTEMBER 24, 2019 6:15 AM
Source: CityIndex