AUD/NZD testing bulls’ nerves, bullish structure intact

FXStreet (Bali) – AUD/NZD is testing macro bids near the 1.13, where strong buying interest is expected, following the latest sharp retracement as algo-led sales hit the AUD on disappointing Australian retail sales and Chinese HSBC services PMI.

Kiwi still the weakest of all, further RBNZ cuts eyed

The market still remains heavily short the Kiwi, and despite the relief rally post US NFP, the Kiwi is still perceived as one of top candidates to keep depreciating, as the market expects additional rate cuts by the RBNZ in coming months.

Westpac now expects the OCR to be cut by 25bp at each of the July, September and October RBNZ meetings, noting that “over the past week emerging news has shifted that fourth cut from a risk scenario to a likelihood.”

The bank argues “a marked deterioration in NZ economic sentiment, evidenced by our Consumer Confidence, Regional Economic Confidence and Employment Confidence surveys, as well as ANZ’s Business Outlook survey, while also detecting a distinct souring of business confidence in our visits to businesses and regions around the country.”

The bank also cites the following reasons: “This week’s sharp reduction in global dairy prices. The RBNZ is currently acutely focused on dairy prices. The sharp sell-off in Chinese equity prices. Heightened tensions in Greece, which may also affect confidence.”

AUD/NZD technicals still reveal a bullish picture

As long as buyers can successfully defend the 1.13 handle on a daily close basis, the market should be viewed as bullish. Even if the level is temporarily breached, an ascending trendline off April 17 lows through late May should still act as another important line where sources of demand should step in. The Kiwi needs to make a considerable amount of progress, breaking below mentioned trendline – not seen occurring via Kiwi strength – to damage the bullish structure of the market. Should bulls regain control of the market on an intraday basis, the major target for the coming week remains 1.1575/16, as commented in previous analysis.

AUD/NZD is testing macro bids near the 1.13, where strong buying interest is expected, following the latest sharp retracement as algo-led sales hit the AUD on disappointing Australian retail sales and Chinese HSBC services PMI.


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