AUD / NZD: RBNZ decision on rates _10/03/2016

Trading recommendations

Sell ​​Stop 1.1180. Stop-Loss 1.1220. Take-Profit 1.1100, 1.1085, 1.1000, 1.0800

Buy Stop 1.1230. Stop-Loss 1.1190. Take-Profit 1.1260, 1.1300, 1.1400, 1.1500, 1.1600


Technical analysis

On the weekly chart, the price is very close to the key resistance level 1.1260 (EMA200 and Fibonacci level of 38.2%). The latest wave of decline, which began in November 2011 with a mark of 1.3220, stop 1.0050 near the level in April 2015. To date, the time correction is to reduce prices was 38%.

On the daily chart the Stochastic is in the overbought zone, while the 4-hour chart indicators OsMA and Stochastic are beginning to unfold in short positions.

It is perfectly acceptable price decline to the support level 1.1085 (EMA144 on the weekly chart). With the development of the reduction and fixing prices below support level 1.0800 (EMA200, EMA144, EMA50 daily chart and Fibonacci level of 23.6%), the pair may fall to levels 1.0535, 1.0445.

The reverse scenario involves securing prices above the level of 1.1260, followed by an increase to the level of 1.1635 (Fibonacci level 50%).

Further dynamics will depend on the macroeconomic indicators of New Zealand and Australia, and from the position of the central banks of the two countries regarding their monetary policies.

Support levels: 1.1085, 1.0800, 1.0535, 1.0445

Resistance levels: 1.1260, 1.1635


Overview and Dynamics

Amid fears of a further deterioration of the global economic outlook, especially in growth in China, and inflation expectations in most of New Zealand, the Central Bank of New Zealand yesterday unexpectedly cut interest rates by 0.25% to 2.25%.

According to the bank, taking into account the fall in world commodity prices and the New Zealand exports, the decline of the national currency value "is justified" because trade-weighted exchange rate of the New Zealand dollar at 4% above the December forecast.

The New Zealand dollar has fallen off yesterday on the entire market, and the pair AUD / NZD rose more than 220 points. Volatility in the moment of the news of almost 200 points.

On the other hand RB Australia since May 2015 keeps interest rate unchanged at 2%, while other central banks gradually reduce the rate of its national currency.

According to some estimates, the Australian dollar is overvalued by 10%. And, according to the board of the RBA member John Edwards, a fair exchange rate is close to the level of 0.6500.

Sharp appreciation of the Australian dollar could be a catalyst for reducing the RBA interest rate. Near the RBA meeting on the issue is scheduled for 5 April.

Given the sharp rise in the pair AUD / NZD in recent days and the achievement of key resistance levels, and also arisen strong imbalance spreads priced in Australian and New Zealand dollar against the US dollar, it is possible to roll back the price levels achieved in the direction of the global downward trend.