Potential signal
- I am a buyer of this pair here, with a stop loss just below the 50-day EMA at 1.21, and a target of 1.2285.
The Australian dollar pulled back slightly during the trading session on Thursday but continues to see a little bit of support near the 1.2150 level against the New Zealand dollar. This is a pair that does tend to grind longer term, but it's interesting that we find ourselves recovering over the last couple of days after our initial pullback.
All things being equal, I believe this is a market that will continue to try to reach the highs near the 1.23 level. Even if we were to fall back from here, I believe the AUD/NZD market at this point in time would also see support at the 50-day EMA just above the 1.21 level and, of course, the 1.20 region.
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Interest Rate Differentials and Energy Concerns
Ultimately, I think this is a situation where the interest rate differential continues to favor Australia and probably will going forward as the Reserve Bank of Australia had recently raised rates. New Zealand, on the other hand, finds itself in a world of hurt and, of course, we are starting to see concerns about energy in New Zealand due to the supply disruption in the Strait of Hormuz and all of the issues surrounding that region at the moment.
And that, of course, is going to continue to be a major issue going forward, even if they do open up the strait right away. Places like New Zealand are particularly vulnerable, and I think that will be reflected in not only the currency but equities in New Zealand and the like. So, with that, I remain very bullish longer term, and I recognize that we could have a situation where you are simply buying the dip.
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