Next week is all about the Australian and New Zealand dollars. We will hopefully find out which of the two currencies is stronger relative to the other one as central banks of both nations have their policy decisions. In addition, we will hear from governors of both the RBA and RBNZ, not to mention there will be some important data from the region. The volatility in the AUD/NZD therefore should go up by a good few notches. I think at the moment the RBNZ is a touch more dovish than the RBA, so I therefore expect the AUD/NZD to rise in the coming weeks.
Next week’s key fundamental events from the two nations, among other things, include:
- Monday: Australian Retail Sales, ANZ Job Advertisements and AIG Construction Index
- Tuesday: NZ Inflation Expectations; RBA interest rate decision & policy statement and GDT Price Index
- Wednesday: (Thurs morning NZ time): RBNZ interest rate decision, RBNZ Monetary Policy Statement and RBNZ Press Conference
- Thursday: Speeches from Governors of RBNZ (Wheeler) and RBA (Lowe)
- Friday: RBA Monetary Policy Statement
So the economic calendar is jam-packed with data from both nations. It will be almost impossible for traders to predict every fundamental move correctly. But through in technical analysis, the job may become slightly easier. Reaction of price around key levels should provide traders quick feedback if they are right or wrong or about a particular idea. At the moment, the AUD/NZD is basically stuck between a rock and a hard place. Resistance has been provided by the downward-sloping trend line and the 200-day moving average, which is also sloping downwards. The slope of this MA tells us objectively that the trend over the past 200 days have been bearish. Support meanwhile has been provided by the rising trend line. Put another, the AUD/NZD is coiling for a breakout – potentially a big one.
But is the trend turning bullish? Recent price action certainly points that way. So far, two clear attempts from the sellers to push the AUD/NZD below the swing points have failed. Is this telling us that the AUD/NZD has bottomed out? If I was a betting man, I would say that is the case. But I am not. Let’s remain objective and wait for price to tell us if we have seen a bottom. We need to see a break in market structure i.e. when price forms a higher high above 1.0570 or ideally 1.0770 swing high points. Only when this condition is met will the technical outlook turn decisively bullish for the AUD/NZD.