FX markets on hold overnight for the 4th of July holiday and ahead of this evening’s employment report in the U.S. One highlight was the ability of the AUDNZD cross to close back on a 1.0500 handle, after enjoying a better run of data/news.
The rally in the cross commenced on Tuesday afternoon, shortly after the RBA cut the cash rate as expected to 1.00%. Perhaps catching the market off guard, the RBA toned down its easing bias in the accompanying statement, indicating monetary policy will be only adjusted “if needed”. A warning that additional rate cuts are not a fait accompli.
Wednesday bought another record trade surplus in May, buoyed by a A$1.3bn rise in iron ore receipts. Booming resource exports and sluggish imports have resulted in Australia's trade surplus expanding from A$0.8bn 12 months ago to A$5.75bn in May. The strong rally in the price of iron ore last month, suggests another record trade surplus for June is in the making.
Accompanying the record trade surplus, a further parting of the grey clouds that have overshadowed the property market. Dwelling approval rose by +0.7% in May, higher than expected and made more notable because in the lead up to the Federal election in May, proposed investment housing tax changes were a hot subject of debate.
Even the softer than expected retail sales print for May failed to cause much of an impression and bring more sharply into focus a chart pattern and trade idea highlighted in an article back in mid-June. https://www.cityindex.com.au/market-analysis/audnzd-in-focus/.
“In short, I like buying dips in AUDNZD towards 1.0530/20, leaving room to add at 1.0450/20. The target is a retest and eventual break of the recent highs near 1.0730 with a stop loss placed below 1.0370.”
For those that have followed the roadmap above, the price action this week has been encouraging. A break/close back above 1.0520/30 would consolidate the idea that a rally towards 1.0730 is underway and a good reason to raise the stop loss on the trade up to 1.0418 from 1.0370.
Source Tradingview. The figures stated are as of the 5th of July 2019. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation
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