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AUD/NZD on a tear, feeling up the 4hr 100 SMA and 21-D SMA

  • AUD/NZD has been travelling in a much wider range due to the volatility over the FOMC and NZ GDP. 
  • AUD/NZD bulls eye the 23.6% fibo at 1.0543.

The bulls are currently in charge, taking on the 1hr 100 SMA with plenty of milage still to go judging by the momentum of the move and RSI on a northerly trajectory. 

As far as the latest data from the New Zealand economy comes, it has proven that the economy has expanded by only 0.3% q/q in Q3. This is a pretty dismal result considering Q2’s strong 1.0% q/q print and vs the expectations of 0.6% and 1.0% in Q2.  For the y/y, up 2.6% expected 2.8% y/y, prior 3.2%, revised up from 2.8%. 

The RBNZ had a forecast well off the mark at 0.7% growth for Q3 which will lend support for a lower bird on interest rate differentials. "We expect growth can continue to muddle along at an annual pace of 2½-3%, as a number of economic headwinds and tailwinds play out. This would be a touch shy of where we see trend growth, suggesting it will be a struggle for core inflation to lift sustainably to the RBNZ’s 2% target," analysts at ANZ Bank argued. 

FOMC outcome

As expected, the Federal Reserve hiked rates following unanimous at the FOMC. Rates were raised by 25 basis points to 2.25% - 2.50%. The Statement came with little new, repeating that risks to the economy appear 'roughly balanced' and will "continue to monitor economic and financial conditions for their effects on the economic outlook." However, the Fed forecast two hikes in 2019, above where the street has priced which fulled a rally in the greenback. There was also a boost to growth forecasts for 2020 but downgrades to 2018 and 2019 while inflation forecasts were unchanged - (DXY rallied from 96.61 to a high of 96.96) - That is a toxic cocktail for risk appetite and weighs on the high beta bird. 

  • Federal Reserve's FOMC statement - Dec. 19 - full text
  • FOMC raises the target for fed funds rate by 25bp to 2.25% - 2.5%

GDP forecasts:

  • 2018 3.0% vs 3.1%
  • 2019 2.3% vs 2.5% prior
  • 2020 2.0% vs 1.8% prior

Inflation:

  • 2018 1.9% vs 2.0% prior
  • 2019 2.0 vs 2.1% prior
  • 2020 2.0% vs 2.1% prior

AUD/NZD levels

A break of the 1.05 figure opens a run to test the 23.6% Fibo of the late Oct highs and recently posted lows. Above there leaves scope for a test of the 21-D SMA located at 1.0575. Bulls need a break to 50% of the aforementioned range, while otherwise, the price is subject to a re-run of the recent lows guarding S2 at 1.0412 and S3 1.0366.

 

 

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