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Great Graphic: Aussie-Kiwi Approaches Trendline

Today is the fifth consecutive session that the Australian dollar has weakened against the New Zealand dollar. It has now fallen to test a three-year old trendline that we show on the Great Graphic, composed on Bloomberg.

The last leg down in the Aussie actually began last October, and through today’s low, it is off by a little more than 7%. In fairness, it has really been in a broad range fro several years, roughly NZD1.03 to NZD1.14, and mostly NZD1.05-NZD1.10. The trendline comes in now near NZD1.0445.

The technical indicators on the daily bar charts are not generating strong signals that a bottom is at hand. The RSI is at new lows since February 21. The MACDs have not been above since last November and are also at there lowest levels since late February. The Slow Stochasitcs put in a low in late March but are still in the trough.

Some observers are concluding that New Zealand is less exposed than Australia to a trade war.

In the CME futures, we note that the net speculative position is now net short the Aussie and net long Kiwi, but the positions are small. However, we suspect that the logic is post-hoc in the sense that the cross was already moving against the Aussie long before the trade tensions escalated. And one of the big knocks against the Aussie is that its curve is below the US. The same can be said for New Zealand.

AUD/NZD, 2014 - 2018

AUD/NZD, 2014 - 2018

- Click to enlarge

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Marc Chandler
He has been covering the global capital markets in one fashion or another for more than 30 years, working at economic consulting firms and global investment banks. After 14 years as the global head of currency strategy for Brown Brothers Harriman, Chandler joined Bannockburn Global Forex, as a managing partner and chief markets strategist as of October 1, 2018.
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