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AUD/NZD still drifting sideways but continues to find bids below 1.1990

FXstreet.com (Barcelona) - The AUD/NZD traded in a narrow range, again finding bids below the 1.990 level and holding previous support to finishing the day up six pips at 1.9999

According to Mike Jones, Currency Strategist at BNZ, “the fact the NZD now appears to have a higher beta than the AUD is significant. Rather than anything unusual, it should be interpreted as a return to normality. We’ve previously outlined the three key determinants of a currency’s risk profile as: external imbalances, interest rates, and economic sensitivity to commodity prices. The fact the AUD was the more ‘pro-risk’ currency from 2009-2012 reflected in part the AUD’s higher commodity price sensitivity and weaker external accounts picture.” But the more important factor was interest rates. In a departure from historical norms, Australian yields moved above those of NZ in June 2008. This meant that, in so-called ‘risk on’ periods when the carry trade was in full flight, the AUD tended to outperform the NZD as its higher yield sucked in more capital inflows. Now, this is changing. NZ interest rates have finally moved back above their Australian counterparts. This has contributed in no small way to the NZD reclaiming its status as the higher risk currency.”

The FXStreet.com Trend Index remains in slightly bearish set up on the daily set up on the 1 hour chart, while the OB/OS Index reads neutral. There is a possible inverse head & shoulders bottom patterning forming on the 1 hour chart, which would need an hourly close above 1.2030 to be confirmed and would target 1.2070. Initial resistance remains at 1.2030 (the 9dma), followed by 1.2056 (the 20dma). First support sits at 1.9990 (bullish candle on 1 hour chart), followed by 1.1973 (previous day low).

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