AUDNZD history and outlook

Here is the AUDNZD chart, as mentioned below. If anyone out there has more data I would be grateful if they could leave a comment and then maybe we can arrange for the data to be sent over to me so that I can get a better history. In any case we can see that the pair has been trading in a monthly wedge for the last twenty years. However the recent attempt at meeting the lower wedge support has been rejected with a swift push higher again. Based on the reasoning below I favour a return towards the recent high at 1.2970, and then should the wedge break to the upside, I have projected targets at 1.3180/1.4170/1.4760 further out.

Evidence; Big purple wedge = 21%

So here is the New Zealand export data for the last year. I eliminated all trading areas apart from 'Europe', and have just left the countries, (please see the key). In any case it turns out that my assumption was correct and that Australia is the largest trading partner of New Zealand. The Australian wedge of the pie represents about 21% of trade so quite a big slug. A monthly chart will follow shortly.....

AUDNZD - The beginning of a trading idea.....

I was talking to a friend today and we are both coming round to thinking that there is potential for AUDNZD to behave in much the same way as EURGBP has done in the last couple of years. In making this analogy we are thinking of NZD as being like GBP and AUD as being like EUR. This is not based on debt levels as such but by virtue of the fact that it is our assumption that New Zealand is more dependent on Australia economically then the other way round. I am getting some basic data sent to me to be able to manipulate it and will hopefully have a pie chart up soon.

New Zealand has been in a similar position to Iceland. It has experienced a vast inflow of capital due to its high interest rates (which are falling). This capital is now being withdrawn rapidly, and although not quite an Iceland, New Zealand is unlikely to have the depth in it's economy, when compared to Australia, to weather the contraction in liquidity and credit.

In the medium term, trade will be one of the few things that can relieve the likely economic situation that is unfolding for New Zealand. Thus a weak currency versus it's probable biggest trading partner is desired. I will upload a chart of the pair soon with some analysis. In the meantime I am left thinking that there must be an upwards bias to AUDNZD over coming months. I intend to look into this more and will update soon.....

USD Index hints at near term dollar weakness

The extension shown above appears to have exhausted itself. This combined with MACD divergence points to a sharp fall back to the 75.90- 80.00 region, before the possibility of a continued recovery in the USD index. This may also coincide with some strength in global equity markets, but that remains to be seen. A 25% apprcaitaion in the index since Mid July is quite a move. If this were to continue at the same rate going forward the US would price itself out of any hope of an export led recovery. To my mind this is one component of GDP that may enable the US to begin a recovery, but that would surely be made more sustainable if the USD were weaker not stronger. But more of that later.........

Swedish Krone update

Following on from my post below, I have updated the USDSEK chart and continue to view recent price action as being conducive to a substantial pullback. Although the high on 27 October was breached, in doing so a rising trend channel was created followed by a false break higher. This has now led to a push below the channel support. Incidentally The USD index also looks weak so targets between 6.8400 and 6.4400 are still reasonable. I will try and write a Dollar index post shortly.

The Swedish Krone, a possible buy at these levels

Falling inflation, and central banks that recognise it, have on the whole been rewarded. The Riksbank cut interest rates by 50 basis points on 23 October with more to come over the next six months. With dollar strenth somewhat over extended there is scope for a pullback in USDSEK before the potential for more USD strength. The extension shown in the chart above may unwind providing, the recent high is not broken. The danger to this trade is that the dollar index continues to head higher up to 91/92. Nothing travels in a straight line, and with the US shedding jobs at the rate revealed on Friday, the ability to export their way out of their troubles will be dented if the dollar continues to strengthen in the manner witnessed over the last 3 months. I appreciate the arguement about this being a consumer led recession, and the implication for the US current account and global liquidity, but the risk reward in my view is skewed to selling USD over the next few weeks/months. If the trade gathers momentum there is scope for 6.8400 and possibly lower.

Introduction

Dear visitor, welcome to You buy the high, I sell the low. With any luck this blog will be a place where you can visit to get some ideas for macro trading, and may at times be used to share ideas on economics and politics. I hope you enjoy the content and that you will re-visit many times in the future.