It's Retracements Versus Dominant Trends For The Australian And New Zealand Dollars

Daily Forex Technicals | Written by DailyFX | Sep 12 08 13:51 GMT |

It has been an arduous few months for the high-yielding Australian and New Zealand dollars. With both the RBA and RBNZ proven their willingness to cut both currencies' primary attraction (a high yield), both have tumbled significantly against most of their counterparts. However, this drop may be long overdue for at least a temporary retracement. See what each DailyFX Analyst thinks and how they are positioning below: Currency Strategist - John Kicklighter My picks: Short NZDUSD Expertise: Combining Money Management with Fundamental and Technical Analysis Average Time Frame of Trades: 3 days - 1 week From a fundamental perspective, there is no currency in worst shape than the New Zealand dollar. The RBNZ recently cut its overnight lending rate by 50 basis points. Far more important (as the market's outlook usually is) was Governor Bollard's comments that the economy was already in a recession and that further easing was likely. With such economic malaise, cooling inflatio and a proven willingness to delivering large rate cuts to the benchmark rate, the true international value of the New Zealand dollar (as a carry currency) is essentially put into jeopardy. Technically, NZDUSD is in a strong downtrend, though there have been significant retracements along the way (unlike other dollar denominated pairs). When considering a setup though, it is always best to approach as a skeptic. The issue here is in the trend itself. It's wise to always go with the trend; but the longer it is has been in place, the more likely there are to be significant retracements. There is also fundamental concern in the US dollar's strength. We have seen the currency pull back across the market as financial market concerns have grown and the probabilities of a possible interest rate cut have grown (there is a 20 percent chance of a 25bp cut in October according to Fed Fund futures). So, now we have a inflection point in a dominant technical and fundamental trend. The best way to approach a short NZDUSD now is through a sound setup. Now testing 0.66, we are at a former support level and just above a major retracement level (going back 7 years). Stops can be set relatively close, but still be conservative. A falling trend on the lower time frame (240 minutes) that is now within 0.67 will stand as the line in the sand. Currency Strategist - Terri Belkas My picks: Long GBP/AUD Expertise: Fundamentals Combined With Technicals Average Time Frame of Trades: 1-3 Days While there's immediate resistance looming at 2.2000/93, I like GBP/AUD to the upside. On the daily charts, it looks like we have a bit of an inverse head-and-shoulders formation, and I'll be looking for a break above the neckline at the 50% fib of 2.3892 - 2.0300 at 2.2093 to target 2.2500. Meanwhile, on the 240 minute charts, GBP/AUD is holding within a rising channel formation. As long as price holds above the supporting line of that channel at 2.1825, I see no reason to doubt that the GBP/AUD rally will continue. Currency Analyst - Ilya Spivak My picks: Short AUDUSD below 0.8357 Expertise: Macro Fundamentals, Classic Technical Analysis Average Time Frame of Trades: 1 Week - 6 Months Having sold off sharply since mid-July, the AUDUSD has shown a bullish Hammer candlestick squarely above support at the psychologically significant 0.80 level and the 138.2% Fibonacci extension of the 01/22-07/15 rally. A pullback eyes resistance at 0.8357, the 23.6% retracement of the most recent down leg starting 07/15. Look for a pullback to this level and look for signs of a reversal to enter short. Currency Analyst - David Song My picks: Short AUDNZD Expertise: Fundamentals Combined with Technicals Average Time Frame of Trades: 2 Days - 2 Weeks After hitting an intraday high of 1.2996 on 7/24/08, the AUDNZD has moved lower to hold within a range between 1.1980 and 1.2510. After finding short-term support around 1.2000 earlier this week, price action has moved to the upside to hold above 1.2215. The significant decline in the Australia dollar crosses suggests that the depreciation of the aussie will continue, and I expect the downward momentum to lead the AUDNZD below 1.2000 over the next few days. DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. 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