NZ’s QE Machine Puts Pressure On Kiwi. AUD/NZD To Outperform
The RBNZ has today reiterated its position on COVID-era stimulus, promising to “continue with the Large Scale Asset Purchase (LSAP) programme aimed at keeping interest rates low for the foreseeable future. The LSAP quantum remains set at $60 billion. The assets included are New Zealand Government Bonds, Local Government Funding Agency Bonds, and NZ Government Inflation-Indexed Bonds. The Committee is committed to reviewing this quantum at regular intervals, with a focus on achieving its remit.”
This action has put the Kiwi under pressure as fears of continued monetary debasement against other currencies drives demand for Kiwi lower. When compared with its trans-Tasman neighbour, (who will no doubt also continue QE measures in the face of economic pressures – albeit not yet) we see AUD/NZD strength as likely.
As we look at the AUD/NZD Weekly chart, we note that price has been bound within a range, excluding extreme volatility shocks of approximately 500 pips since early 2019. The range indicated by the IcarusSupport Resistance Lines™ shows price at the upper level of the range of approx 1.0815 – 1.0360. The upturn in the Icarus Oscillator in early April 2020 marked a bottoming from the lows of recent years, coinciding with a confirmed presentation of the Icarus Reversals Indicator as price closed above the 1.0355 mark, (which correlated almost perfectly with the Support Resistance level) and then continued higher amidst the March COVID-induced volatility.
The support and resistance zones on the Weekly chart are shown via the IcarusAutoSupportResistance Lines, highlighted as the light green solid lines, and are currently located at the following values:
- 1.0816
- 1.0525
- 1.036
Remaining on the Weekly Chart, we note that the Icarus Oscillator has shown a continuation in direction, with the zero-control line suggesting neither expansion or contraction of the Oscillator value. We note that the Oscillator appears to be rolling over, although no confirmation has yet occurred.
AUD/NZD. Icaurus Oscillator continues to suggests trend continuation, although caution applied as roll-over approaches
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Looking at the Daily chart, we identify a range of supporting elements to confirm the longer-term outline provided by the Weekly chart. The recent announcement by the RBNZ has pushed price through two confirming levels (1.0670 and 1.0720), as outlined by the Icarus Support Resistance Indicator, while the Icarus Oscillator also shows a recent change in direction on the current Daily bar.
AUD/NZD. Daily Chart with multiple confirming elements
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The 1HR chart provides a clear entry signal, with price moving higher through the Icarus Support Resistance Levels, marked at 1.0688 and 1.0697, on increased volume compared with previous. Clearance of the psychologically important 1.0700 level is also supportive
Further, the 1HR chart shows the Icarus Oscillator supporting a move higher, with transition from short bias to long bias again outlined by the appearance of the change in status to green/higher.
AUD/NZD Hourly. Multiple level clearance on increasing volume.
The appearance of the Icarus Oscillator Levels in recent bars, and subsequent clearance of the control line, on higher volume is suggestive of continued gravitation to higher Oscillator levels set at: 1.0745, 1.0788, 1.0853 and 1.0960
AUD/NZD Hourly. Multiple level clearances plus the Icarus Oscillator Level appearance with higher volume confirms long signal
Entered Long AUD/NZD at: 1.07244
- Stop Loss (S/L) will be placed at 1.0660, being below the Hourly resistance levels of both 1.0688 and 1.0697 (as crossed), and below the Daily level which is also below both the IcarusOscillator Level, the Trendline on 1HR and the Daily IcarusSupportResistance line. It is also a level below recent lows printed in the last 3 sessions. Plenty of likely support to hold higher levels
- Take Profit (T/P) evaluation level will be set at 1.0830, with price action determining exit.
Risk = 64 pips
T/P = 106 pips
R/R Ratio = 1.65 (flexible), depending on price action at 0.9080 level
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Mohamed El-Erian, chief economic advisor at Allianz, joins “Squawk Box” to discuss Wednesday’s market plunge as well as the prospects for an economic and financial recovery from the coronavirus crisis.
