Thursday, March 13, 2014

Aussie bounces back on very strong employment numbers | Kiwi does the business

 The Australian Employment Change report, which came out at midnight GMT, blew all expectations out of the water. The outcome was some three times better than the consensus had expected. The fact that this came about on a new measurement methodology was not enough to prevent the Aussie dollar from sharply reversing the downward tendency it had shown up to that point.

This had the effect of taking us out of our short trade in AUDUSD, which was under the control of our Mandelbrot algorithmic routine at the time, for a very small loss. The pair is still being monitored by Mandelbrot, and we will be expecting to possibly re-enter when a downward trend is confirmed to its satisfaction. As can be seen in the four hour chart above, we could be in such a down trend, which is always characterised by lower highs and lower lows. However, in this case, right now, it is by no means certain to play out in this way.

Given our longer term analysis of the potential for the Aussie currency, and the very long term trend for it on the charts, which is resolutely down, we are not likely to be tempted to take a long position in this unit anytime soon.

Kiwi does the business

Our New Zealand dollar against the Aussie (AUDNZD) trade, which is also to the short side (we have sold the pair) got a boost from the announcement, at 10:00 PM (GMT) last evening, that interest rates would be increased in NZ by 25 basis points (0.25 percentage points).

While the rise was expected and the Kiwi had been strengthening in anticipation (AUDNZD was falling), the remarks of the governor of the Reserve Bank of New Zealand, Graeme Wheeler, that came with the interest rate rise announcement, were bullish in themselves on other aspects of the NZ economy, and even went as far as to indicate that there are probably other interest rate rises in prospect in the future.

This makes New Zealand the first developed economy to raise interest rates since the onset of the Global Financial Crisis.

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