Tuesday , April 24 2018
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Great Graphic: Aussie-Kiwi Approaches Trendline

Summary:
Today is the fifth consecutive session that the Australian dollar has weakened against the New Zealand dollar. It has now fallen to test a three-year old trendline that we show on the Great Graphic, composed on Bloomberg. The last leg down in the Aussie actually began last October, and through today’s low, it is off by a little more than 7%. In fairness, it has really been in a broad range fro several years, roughly NZD1.03 to NZD1.14, and mostly NZD1.05-NZD1.10. The trendline comes in now near NZD1.0445. The technical indicators on the daily bar charts are not generating strong signals that a bottom is at hand. The RSI is at new lows since February 21. The MACDs have not been above since last November and are also

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Today is the fifth consecutive session that the Australian dollar has weakened against the New Zealand dollar. It has now fallen to test a three-year old trendline that we show on the Great Graphic, composed on Bloomberg.

The last leg down in the Aussie actually began last October, and through today’s low, it is off by a little more than 7%. In fairness, it has really been in a broad range fro several years, roughly NZD1.03 to NZD1.14, and mostly NZD1.05-NZD1.10. The trendline comes in now near NZD1.0445.

The technical indicators on the daily bar charts are not generating strong signals that a bottom is at hand. The RSI is at new lows since February 21. The MACDs have not been above since last November and are also at there lowest levels since late February. The Slow Stochasitcs put in a low in late March but are still in the trough.

Some observers are concluding that New Zealand is less exposed than Australia to a trade war.

In the CME futures, we note that the net speculative position is now net short the Aussie and net long Kiwi, but the positions are small. However, we suspect that the logic is post-hoc in the sense that the cross was already moving against the Aussie long before the trade tensions escalated. And one of the big knocks against the Aussie is that its curve is below the US. The same can be said for New Zealand.

AUD/NZD, 2014 - 2018

Great Graphic: Aussie-Kiwi Approaches Trendline

- Click to enlarge


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Marc Chandler
Marc Chandler is Global Head of Currency Strategy of Brown Brothers Harriman (BBH). Previously he was the Chief Currency Strategist for HSBC Bank USA and Mellon Bank. He has been covering the global capital markets in one fashion or another for 25 years, working at economic consulting firms and global investment banks. A prolific writer and speaker he appears regularly on CNBC and has spoken for the Foreign Policy Association. In addition to being quoted in the financial press daily, Chandler has been published in the Financial Times, Foreign Affairs, and the Washington Post. BBH provides specialist services and innovative solutions to many Swiss asset managers that include a global custody network of close to 100 markets, accounting, administration, securities lending, foreign exchange, cash management and brokerage services. Feel free to contact the Zurich office of BBH

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