TechnoMeter

AUD/NZD
The third quarter of the year saw some interesting shifts in the dynamics between Australia and New Zealand. While the RBA largely tried to stay behind the headlines this year, New Zealand has seen some considerable change over the past couple of months.



Jacinda Ardern was elected as Prime Minster of the nation in early-August, and matters haven’t really been the same for the New Zealand Dollar since. Ms. Ardern has already floated ideas that could amount to some pretty large changes at the RBNZ, and at this point, we aren’t even sure of who will be leading the bank next year as interim Governor Grant Spencer has only recently taken over for from RBNZ Governor, Graeme Wheeler. A more permanent replacement is expected at some point next year, but by the time we get that name, the RBNZ may have a) an additional mandate of managing employment as well as inflation and b) another governing body assisting with rate policy, as the Reserve Bank Act remains up for debate.

This is a lot of uncertainty and markets, by and large, hate uncertainty. This also presents an opportunity for continued divergence between Australia and New Zealand Dollars, and this can be followed through the AUD/NZD cross-pair.
AUD/NZD has been largely range-bound for most of the past three-and-a-half years. Most of that time has been spent with price action oscillating between 1.0300 and 1.1300 with only a few instances of outliers. But, as recent themes of Kiwi-weakness have begun to show with a bit more prominence, a clean trend has started to show in AUD/NZD inside of this range, and there is the potential for that trend to continue in order to finally resolve almost four years of mean-reversion. Sustained breaks above 1.1300 opens the door for bullish exposure as we move into 2018.

more...