Wednesday, April 30, 2014

Time to look at the Antipodeans again | Pound strength or dollar weakness?

 The Aussie and the Kiwi are aligning themselves for a possible trade once again. As can be seen in the four-hour chart above of the Australian dollar against the New Zealand dollar, the initial stages of a downward trend might have come into being. We already have the lower high (lower lows and lower highs define a downtrend) and seem poised to achieve the lower low. All that stands in the way is 200 period Simple Moving Average, which coincides with the support that is provided by the last low.

Separately, on the fundamental analysis front, the International Monetary Fund (IMF), in its Regional Economic Review for Asia and the Pacific, released on Monday, has indicated that it expects the Australian economy to grow at a below-trend rate this year and next. At the same time it has actually upgraded its growth forecasts for New Zealand, on the basis of the post earthquake reconstruction of Christchurch, strengthening domestic demand and export growth.

Pound strength or dollar weakness?

The Pound Sterling against the US dollar continues to move upward, as discussed in yesterday’s commentary. This pair got a nice boost on the back of the less-than-stellar US GDP figures that were released yesterday. These were no doubt affected by the severe weather stateside during the quarter in question, but they have consolidated the belief that rates in the US will remain low for the foreseeable future, a fact once more reiterated by the FOMC after its two-day meeting which concluded yesterday.

So is the rise of this pair down to Sterling strength or US dollar weakness, or perhaps a little of both?

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