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We are looking for an upside breakout in AUD/NZD. Inflation reports are scheduled for release from Australia and New Zealand next week and we believe these reports will highlight the divergence between the 2 economies. In Australia we look for higher commodity prices and consumer inflation expectations to drive Australian CPI upwards but in New Zealand, lower dairy and food prices should keep NZ CPI under pressure. This means AUD/NZD, which had been trapped in a tight 1.0450-1.0560 trading range for the past 9 trading days could finally breakout to the upside.
Taking a look at the daily chart, if AUD/NZD breaks above this year’s high of 1.0572, it would represent a clean break above the 200-day SMA and opens the door to 1.0650. However if it drops below 1.0450, which takes the pair underneath the 20, 50 and 100-day SMA, we could see the year to date low near 1.0350 tested.