Chart of the Day AUDNZD
AUDNZD Potential Reversal Zone - Probable Price Path
Market sentiment remains positive, with equity markets have extended their gains from yesterday while global rates have moved higher and curves steeper. The USD is broadly stronger after a much better-than-expected retail sales release although most currency moves have been modest. Yesterday, New Zealand Debt Management raised a huge $7b via its May-2024 bond syndication, a record amount for a New Zealand deal. There has been a lot to digest over the past 24 hours with markets focusing more on the positive news. The S&P500 is up 1.5% overnight and more than 6% above its intraday low reached yesterday morning, before the Fed announced that it would start its corporate bond buying. European equity markets rose between 3 to 4% overnight while the Nikkei rose 4.5% yesterday. Global rates have moved higher, and curves steeper, reflecting the risk-on mood and the prospect of more US fiscal stimulus (see below). The 10-year Treasury yield is 3bps higher, at 0.75%, while the 30-year yield is 7bps higher, to 1.53%. US retail sales was much better than expected in May, bouncing back after the lockdown-enduced falls in March and April. Total retail sales rose a record 17.7% in May with large increases (from a low base) in categories such as clothing and furniture. Retail sales excluding food services (i.e. spending in restaurants) remains 3.7% below its January peak, but the data gives hope to those looking for a sharp recovery in the economy as it reopens. Besides the easing of restrictions in some states, US retail spending has been supported by enhanced US unemployment insurance – which is scheduled to expire at the end of the month – and the US government’s stimulus, which included cheques sent directly to households. The commonly followed Citi US economic surprise index is at a record high.
AUD: Australian Foreign Minister Payne criticized China for producing false information during the epidemic, and his remarks may further aggravate tensions between China and Australia. The leading index of the Western Pacific Bank of Australia in May rose 0.19% month-on-month (the previous value was revised down to 1.47%)
NZD: New Zealand’s current account surplus in the first quarter was $1.56 billion, which was similar to expectations; the accumulated current account deficit in the four quarters was equivalent to 2.7% of GDP, which was also in line with expectations and was the smallest deficit scale since the fourth quarter of 2017. The average auction price of New Zealand whole milk powder is US$2,829 per ton, up 2.5% from the auction two weeks ago
From a technical and trading perspective, the AUDNZD is mapping out a potential broadening top or Expanding or Reverse Symmetrical Triangle, an expanding triangle or a megaphone top, the reverse symmetrical triangle is a bearish indicator, and the technical implications are usually extreme. It is a rally to a new high, weakness to an intermediate support level. Then it’s a second rally to a higher high on increased volume and a decline through the intermediate support level. And, finally, there’s a third rally to a higher high on strong volume, followed by an eventual collapse. Again, this pattern develops because of indecision and extreme volatility. Monday's key reversal pattern from projected triangle support suggests we could now have a base for the final leg of the pattern to play out as such bullish exposure should be rewarded on a breach of Monday’s high at 1.0690 targeting the projected triangle resistance to 1.0950.
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Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!