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 This capital is now being withdrawn rapidly, and although not quite an Iceland, New Zealand is unlikely to have the depth in it's economy, when compared to Australia, to weather the contraction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.....