The Australian Dollar and the New Zealand Dollar are two commodity currencies that are heavily dependent on China as a trading partner. As the slowdown in China continues, it directly effects the economies of Australia and New Zealand. With no end in sight to the trade war between the US and China, fears spread throughout the region (and the world), which continue to put pressure on the manufacturing industry in both countries. Given that both these economies are so reliant on China, which is the better currency to own at this point?
Both AUD/USD and NZD/USD are trading at or near multi-year low:
Source: Tradingview, FOREX.com
Source: Tradingview, FOREX.com
With the larger than expected rate cut last week by the Royal Bank of New Zealand (-50bps vs -25bps expected), along with RBNZ’s Orr noting “nothing is ruled out for the future”, the NZD/USD traded to new multiyear lows. However, at the same time, this sparked fears that the Reserve Bank of Australia may need to “play catch-up”, and lower rates as well. This pushed AUD/USD to new yearly lows. And although Australia’s employment data came out stronger on Thursday (41.1K vs 14.0K expected), it was not enough to push the currency pair higher.
AUD/NZD
Looking at AUD/NZD Daily Chart, price recently had a false breakdown out of a longer term triangle and is currently near 1.0547. This level is not only trendline resistance, but also the 61.8% retracement from the May 7th high to the August 6th low.
Source: Tradingview, FOREX.com
On a 240 minute chart, price is currently in an ascending wedge and diverging with RSI. If price we to break lower from the ascending wedge, the target would be the full retracement of the wedge, which is 1.0454, roughly 100 pips lower from currently levels. There is also horizontal support which comes in near the target level.
Source: Tradingview, FOREX.com
It appears that AUD is leading the way over NZD at the moment. However, those who think the AUD may be a bit overdone on the upside, may look to short AUD/NZD at current levels with a stop above the descending trendline on a daily.
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