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AUD/NZD – Headed for New Lows
For the past month, AUD/NZD gradually trended lower and we continue to look for new lows in the currency. The sharp sell-off in U.S. equities at the end of last week stripped the Australian dollar of its beginning of the week gains and left the currency in negative territory. Labor market numbers are due for release next week and the market expects a relatively robust gain of 15K new jobs on top of the 27K new jobs generated in July but according to the latest PMI readings from the Australian Industry group all three sectors – manufacturing, construction and services are deep in contraction territory having fallen by as much as -9.5 points in just one month alone. What’s even more troubling is that employment sub-indexes of all three reports are well below the 50 boom/bust line suggesting that at very best the labor report next Wednesday will miss its mark, and at very worst could show a net job loss for the month. As such, we expect further losses for AUD. Meanwhile dairy prices continue to rise and the improvement in New Zealand retail sales and trade numbers suggests that next week’s Q2 GDP numbers will be strong. For these reasons we could see new 2016 lows in AUD/NZD next week.
Technically, AUD/NZD resistance is at 1.04 and more significantly 1.05 but we have to turn to the monthly charts for support. There’s some support at 1.03, which is near where the currency pair ends the week but the more significant support level is the March 2015 low near 1.0150