Fundamental Analysis
As the cross approaches all-time lows towards 1.05 (last seen in 1995), naturally the debate has reignited over a pan-continental or shared currency between Australia and New Zealand. This would have seemed highly i m p r oba bl e just a couple of years ago at 1.30 and now at 1.06, there may just be cause for pause. Again embedded in the mid 1980s!
Numer ic a l ly, 1.05 is also r em i n i s c en t of when the Pound hit an all-time low to the Dollar, again back in 1985, and perhaps provides a clue as to the future direction of the AUD/NZD cross.
acceptable rate. However, the Reserve Bank of New Zealand has also taken to ‘jawboning’ the prospect of intervention in the Kiwi, presumably in the hope of achieving a similar result for its own currency as the RBA did.
FX
the measurements may be broadly different, the wealth effect is definitely waning in one of those countries and increasing in the other, therefore we are looking for a move to around 50 which is consistent with some of the l o n g er - t erm averages.
It’s certainly worth keeping an eye on the ZAR, especially with precious metals back in focus
If so, the Kiwi may be expensive at
these
The Pound, then on its knees, rebounded strongly to 1.54 just a year later.
A similar 50% rebound in AUD/ NZD seems a bit implausible right now, not least because the market has done much of
the
RBA’s work for it by driving the AUD lower
to a more neutrally levels and we would
expect a corrective bounce to and consolidation back towards the 1.20 region.
Other markets we’re interested in are
India, where has moved back the Rupee from historic
lows last year at 69 to the Dollar, currently trading at 61. India has more middle class people than America has people and while
Si m il a r ly a bullish outlook may exist for the South African Rand. After understandably weakening to around 11.34 per Dollar on the sad news of Mr. Mandela’s passing and the associated q ues t io n s such an event posed, the ZAR looks well on
its way to retesting the 100 day moving average at 10.60, which if breached may see a return to the sub-10 region. The political situation may be more influential than interest rate differentials in this particular case but it’s certainly worth keeping an eye on the ZAR, especially with precious metals back in focus.
Finally, we also like prospects for the Brazilian Real. Currently at
FX TRADER MAGAZINE April - June 2014 51
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