forex market

AUD/NZD bears see prospects to test of July lows

  • AUD/NZD is in the hands of the bulls as price corrects bearish impulse. 
  • High volatility could be on the cards with the RBA and US elections showdown. 

AUD/NZD rose from 1.0605 to 1.0635 overnight in a relatively quiet FX space as markets brace for the US elections later today, but not before a highly anticipated Reserve Bank of Australia interest rate meeting.

At the time of writing, the cross is trading at 1.0632 between a range of 1.0629 and 1.0638.

Most expect the RBA to ease today, represented in the recent price activity in the Aussie dollar.

Full-blown QE and a rate cut will be no surprise, but if it’s more aggressive, the AUD will come under pressure.

”Recall that in March the RBA cut rates and introduced a package of measures as an initial response to the pandemic and the resulting recession. In September, the Bank boosted the Term Funding Facility. Today, another package of measures will be unveiled,” analysts at Westpac explained.

”We expect the RBA to lower rates, cutting both the cash rate target and the 3-year government bond target from 0.25% to 0.10%. In addition, the Bank will announce an expanded bond-buying program, QE, with the aim of lowering rates across the curve, including 5 years to 10 years,” they said.

”There is debate over whether they will announce a specific total or retain flexibility a la the Fed. Quarterly economic forecasts will be revealed in Friday’s statement but maybe alluded to today.”

Meanwhile, the US elections are going to be important for the US dollar and will likely be reflected in commodity prices or which the antipodeans trades as a proxy.

A Blue wave will potentially see risk rally and support the currencies of the commodity complex. On the flip side, a dollar rally on a surprise Trump victory could see a heavily sort dollar position squeezed out.

AUD/NZD levels

The current correction remains in a bullish environment according to MACD and wit price above the 21 4-hour moving average.

AUD NZD (61) 637399560648015842

However, the price has corrected a significant portion of the latest bearish extension on the daily time frame. Therefore, failures to break beyond the resistant open prospects of a continuation and run on the July demand lows in the 1.0565s.

AUD NZD (60) 637399559760400957

Credit: FX Street

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