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team Graham Parlane

NZD/AUD - Sunk by back-to-back poor NZ data

Posted by Graham Parlane on 14 November 2012


I have been a fan of NZ’s prospects over that of Australia in recent times given the Canterbury rebuild and a number of droughts around the world keeping NZ’s soft commodity prices elevated compared to that of Australia’s hard commodities. The strategy has given a couple of nice runs higher to trade on the NZD/AUD cross but recent data has abruptly turned that around.

Today’s very weak Retail Sales data, coming hot on the heels of the shocking 13 year high in NZ Unemployment,  may see built up long NZD/AUD positions liquidated in coming sessions.

My modelling analysis worked very well today capping the recent bounce in the cross at 0.7860 versus the model sitting at 0.7870/92. The model is splayed wide which is suggestive of a strong move underway and the readings are dropping very quickly. That means selling NZD/AUD around here may have its risk mitigated very quickly, say within 2/3 days.

NZDAUD – click here to view chart

The daily chart is suggestive of a forthcoming test of one year support at 0.7745. A break of that level could get very ugly indeed.

NZDAUD – click here to view chart two

No one expects that the RBNZ will need to cut because they think the boost from Canterbury will be ‘real’ in the RBNZ’s own words but if the world sinks a little again, we get another decent jolt delaying the rebuild.

Cheers G.

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