AUD/NZD – Pause or Bottom at 1.05?

AUD/NZD – Pause or Bottom at 1.05?

AUD/NZD – Pause or Bottom at 1.05?

Fundamentals

We recently received a lot of questions about AUD/NZD. The currency pair is trading at its lowest levels ever. In the past 30 years, AUD/NZD rarely dropped below 1.05 and on the rare occasions that it did, it marked a bottom in the currency pair. Currently it is hovering below 1.05 but having a difficult time moving far past that rate. Traditionally, Australia is the dominant economy with the fate of New Zealand tied to its Western neighbor. However in recent years, New Zealand earned its own international standing through demand from China. In November, AUD/NZD began a deep slide that took the currency pair down more than 7% as the monetary policy intentions of each central bank began to diverge. Despite sharp and successive declines in dairy prices, the Reserve Bank of New Zealand is still talking about raising interest rates. The Reserve Bank of Australia on the other hand expressed concern about the high level of the AUD, indicating that they maintain a dovish monetary policy. A divergence in policy direction is the type of fundamental driver that could sustain the current downtrend in AUD/NZD and drive the currency pair to fresh record lows.

Technicals

In the past 3 decades, AUD/NZD has found buyers between 1.04 and 1.05. The current record low for the pair is 1.0475. If this level is broken, every big round number could be potential support starting at 1.04. Resistance is at 1.06.

Chart Of The Day

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