Aussie continues to suffer at the hands of the New Zealand dollar

Alan Penny

15 March 2019

3 min read


The Australian dollar continues to suffer at the hands of the New Zealand dollar although we did rally slightly during the Friday trading session in a bid to attempts stabilization. That being said, there are plenty of reasons to think this continues to go to the downside, mainly due to the New Zealand economic figures showing signs of strength.

AUD/NZD downtrend

The Australian dollar has rallied slightly during the trading session on Friday, but quite frankly has not made an impression to the bullish side as we continue to see a general negative tone to this market. The 20 SMA is just above, so we could see a short-term pop, but I would expect to see a certain amount of selling pressure in that area. Beyond that, the 50 day EMA, pictured in red on this chart, suggest that we are going to go lower as well.

I believe that the 1.0450 level should continue to be essentially a “ceiling” in the market, just as the 50 day EMA will be. Selling rallies should be the way forward, although I do believe that the Australian dollar is going to continue to show strength against other currencies such as the US dollar.


No need to fight the trend

One of the things about Forex pairs is that they tend to trend for quite some time. Looking at this chart, you can see that there are plenty of areas where we have seen selling yet again, so at this point it’s almost impossible to fight this trend.

New Zealand has been extraordinarily strong as of late, with very strong jobs numbers being one of the main drivers. This is a market that continues to reach towards the 1.02 level underneath, where we had seen the bottom of the massive hammer form from several weeks ago. It’s not until we get down there that you need to start thinking about whether or not we can bounce. If we were to break down below that level, this market will almost certainly go to parity with a quickness.

Chinese economic conditions

China has been stimulating its economy as of late, and as a result it does help both of these currencies, but unfortunately we still have the US/China trade situation weighing upon the Australian dollar. Because of this, it’s likely that the pair will favor the New Zealand dollar do not only to employment figures coming out of Wellington, but also there is a weight around the neck of the Australian dollar until we get some type of an agreement between President Trump and the Chinese. Once we get that, it could be the beginning of the turnaround in this market. In the meantime, it’s likely that we just continue to drift lower.

The main take away

Sell rallies as they occur, unless of course we break above the 1.0450 level on a daily close. Expect trouble down at the 1.02 level, or as soon as we get some type of agreement between the Americans and the Chinese as the Australian dollar will be highly sensitive to that situation. Until then, look for short-term rallies to play short-term selling opportunities in play.

Written By
Alan Penny

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