Published On: Wed, Mar 22nd, 2017

AUDNZD going through a correction ahead of next advance

InstaForex

Background

The Aussie dollar has weakened over the last 24 hours, probably due to a more downbeat tone than expected in the minutes from the Reserve Bank of Australia’s policy review meeting held earlier in the month. The central bank has concerns over the state of the labour market, downplayed the positive impact of the recent rise in commodity prices (iron ore fell 4% yesterday) and noted “a build up of risks associated with the housing market”. On the other hand, it sees upside risks around the global environment.

Tomorrow we will get a policy update statement from the Reserve Bank of New Zealand. The market doesn’t believe the bank’s projection that the official cash rate will remain unchanged at 1.75% until late 2019, instead pricing in a 50/50 chance of a rate hike mid next year. The Kiwi will drop if the dovish assessment is repeated or move up a little if the a more balanced view is presented.

 
Management and risk description

Having met my 1.1000 interim target, AUDNZD is now retracing in an Elliott Wave iv/ correction (see daily chart below) with mathematical support around the mid 1.0800s area.

This correction is expected to give-way to the resumption of AUDNZD’s uptrend toward the 1.1175 level (see daily chart).

Parameters

Entry: Today/Tomorrow: AUDNZD is seen as around the 1.0865 level.

Stop: Just under 1.0800, initially.
Target: 1.1157.
Time horizon: Allow a few weeks.
Daily AUDNZD chart (click to expand)

Source: ThomsonReuters.

Weekly AUDNZD chart (click to expand)

Source: ThomsonReuters. Create your own charts with SaxoTrader; click here to learn more.

For more on forex, click here.
— Edited by Robert Ryan

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