My Favorite Forex Trade: AUD/NZD
March 8, 2010
My favorite forex trade right now is shorting AUD/NZD.
After hitting a 9 year high of 1.3124 last week, the rally in AUD/NZD is losing steam. I should have posted about this earlier, but I think there is still room for the currency pair to fall.
Last week, the Reserve Bank of Australia raised interest rates by 25bp to 4 percent but hinted that from here on forward, they will begin to slow down their pace of tightening. Having already doled out 80 to 90 percent of their planned rate hikes, the focus will now turn to the RBNZ who has not even started to raise interest rates. Granted, the Australian economy is doing far better than the New Zealand economy, it is time for New Zealand to catch up. In January, New Zealand turned its first trade surplus after 7 months of consecutive deficits and in February, business confidence hit a 10 year high. Yes my friends, a TEN YEAR HIGH. With numbers as strong as these, the Reserve Bank of New Zealand will most likely grow more hawkish, paving the way for a rate hike later this year.
Furthermore, 25% of New Zealand’s exports go to China and 25% go to Australia. Therefore the combination of higher commodity prices and strong growth in NZ’s most important trade partners should encourage the RBNZ to adopt a more optimistic tone when they meet later this week.
Finally AUD/NZD presents a good risk reward opportunity from a technical basis. It is currently trading at 1.2975 and if it rallies back above 1.31, the uptrend has resumed. Otherwise, there is no major support in AUD/NZD until 1.2775
Posted in Australian Dollar, Favorite Forex Trades, New Zealand dollar, aud/usd, australian dollar forecast, forex blog, forex signals
content rss
March 9th, 2010 at 10:27 am
Great analysis. Do you think that a rate hike in New Zealand could happen already this week? Or will take many months?
March 9th, 2010 at 12:03 pm
No they will not raise rates this week but they will most likely move closer to a rate hike. I think within the next 3-4 months
March 9th, 2010 at 2:01 pm
First of all congrats on your gbpaud call that was good.
From technical point of view I think it would be a great opportunity if audnzd makes a lower high or failed higher high as that will be an excellent risk/reward ratio rather than opening the position at this point.
Just my 2c worth
March 9th, 2010 at 6:43 pm
[...] Lien sees a short opportunity in AUD/NZD and generally sees a strong [...]
March 9th, 2010 at 9:40 pm
Hi Kathy… I like your work and analysis… And I can see your point. I think technically
AUDNZD may be due for a shallow pull back into perhaps the 1.28s, but fundamentally there is nothing but divergence in these economies. The cross I believe should be a lot closer to 1.35 than say 1.25….
March 10th, 2010 at 1:28 am
[...] Mу Favorite Forex Trade: AUD/NZD | Kathy Lien [...]
March 10th, 2010 at 1:36 am
[...] Lien sees a short opportunity in AUD/NZD and generally sees a strong [...]
March 10th, 2010 at 3:41 am
[...] Lien sees a short opportunity in AUD/NZD and generally sees a strong [...]
March 10th, 2010 at 4:03 am
To Walter: As of today, March 10, on the daily chart of AUD/NZD the setup looks in favor of Kathy’s call for shorting.
March 10th, 2010 at 10:22 am
[...] We’ll probably get information in the RBNZ Rate Statement and press conference. Kathy Lien sees a short opportunity in AUD/NZD and generally sees a strong [...]
March 11th, 2010 at 2:47 am
Hi… with RBNZ dovish tone yesterday.. do u reckon AUDNZD will head higher?..
March 11th, 2010 at 11:42 am
[...] Mу Favorite Forex Trade: AUD/NZD | Kathy Lien [...]
March 11th, 2010 at 3:51 pm
To JPY Forex Fan: Manage your R and R will follow, young padwan!
March 11th, 2010 at 5:30 pm
I see above links mentioned to some sites which point to what Kathy said. Who are those fools who are following “Lien sees a short opportunity in AUD/NZD and generally sees a strong…” shouldn’t they be doing their own research rather than blame Kathy (later) if this goes South ??
March 17th, 2010 at 11:15 am
To Walter: Thank you. I’m looking into this r/r problem of mine. By the way, it’s been a long time since anybody called me a padwan.
March 17th, 2010 at 11:49 pm
[...] week, I wrote that shorting AUD/NZD is my favorite trade. At that time, I said that if the currency pair rallies back above 1.31, then the uptrend has [...]
March 21st, 2010 at 3:20 am
JPY Forex Fan : Your welcome! You never know who on the end of the wire is