Day three: closing our AUD/NZD position

I suggested AUD/NZD could pull back to the 1.0820 to 1.0800 level, given momentum on the hourly chart was starting to accelerate to the downside, and that has come to fruition. 

In New Zealand we’ve just seen the NZIER business confidence come out at the highest level in twenty years. This is of great interest, as it puts the probability of a rate hike from the RBNZ at the January 31 meeting at around 50%. The Q4 CPI print on January 21 is now a key event risk for the NZD, and a number above 1.4% could show that inflation has stabilised and headed towards the upper range of its 1-3% target.

Technically the daily chart suggests being long AUD/NZD, however the hourly chart still throws up the prospect that the pair could go lower, so I am fairly neutral from a technical perceptive. From a fundamental stand point, the prospect that the RBNZ hike rates in January is too much of a risk to be long and thus I close my long position at current levels 1.0805 for a seventeen pip profit.

For me when the technicals and the fundamentals don’t marry, I will generally back the technicals. However when the hourly chart paints a more bearish picture than the daily, I’ll tend to back the short-term view, mix in bearish fundamentals and this is enough of a reason to close longs.

IG Charts

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.