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27 Nov 2014
AUD/NZD: Cascade of stops below 1.09 send rate to a 4-month low
FXStreet (Bali) - AUD/NZD, which in recent days was looking to be coiling up a potential big move, finally managed to break a key support area at 1.09, chopping short term long positions, and snowballing a major cascade of stop loss orders, as momentum persisted until a test of 1.0820, which meant, down 1 full cent for the day at that point, before correcting higher to 1.0840 at present.
There were a few drivers behind the sell-off in AUD/NZD. First and foremost, is the bearish attack in AUD/USD, making new year lows below 0.85, which at the same time, was also assisted by heavy stop-loss orders being tripped in AUD/NZD. On Tuesday, we also saw RBA's Lowe not ruling out the possibility of further rate cuts by the RBA if conditions warrant to so so, while also having a go to talk down the AUD. Also, the ongoing depreciation in iron ore prices is a major source of concerns, weakening the AUD at a macro level. Lastly, the latest Chinese rate cut, judging by AUD moves, has been interpreted as an omen of slower-than-expected economic growth in the country. Traders will now be looking at Australia's Q3 Capex release to set the next near term direction, with risks still evident that a strong number may see sellers emerging at better levels, while a poor outcome will undoubtedly exacerbate AUD pain.
Technically, the breakout of 1.09 set a firmer foundation to reinforce a selling stance near term, with a break below Wed's low at 1.0820 (61.8% fib retrac 2014 rally) now necessary to pave the way towards a much sharper decline at 1.07 ahead of 1.0660. On the upside, plenty of work needs to be done to shift current market profile to a 'buy on dips' mode, with 1.09 up to 1.0940 a major hurdle, followed by the next one at 1.0980 up to 1.1020; while above the former selling will probably recede, only a break of 1.1020 sees bulls re-claiming control.
There were a few drivers behind the sell-off in AUD/NZD. First and foremost, is the bearish attack in AUD/USD, making new year lows below 0.85, which at the same time, was also assisted by heavy stop-loss orders being tripped in AUD/NZD. On Tuesday, we also saw RBA's Lowe not ruling out the possibility of further rate cuts by the RBA if conditions warrant to so so, while also having a go to talk down the AUD. Also, the ongoing depreciation in iron ore prices is a major source of concerns, weakening the AUD at a macro level. Lastly, the latest Chinese rate cut, judging by AUD moves, has been interpreted as an omen of slower-than-expected economic growth in the country. Traders will now be looking at Australia's Q3 Capex release to set the next near term direction, with risks still evident that a strong number may see sellers emerging at better levels, while a poor outcome will undoubtedly exacerbate AUD pain.
Technically, the breakout of 1.09 set a firmer foundation to reinforce a selling stance near term, with a break below Wed's low at 1.0820 (61.8% fib retrac 2014 rally) now necessary to pave the way towards a much sharper decline at 1.07 ahead of 1.0660. On the upside, plenty of work needs to be done to shift current market profile to a 'buy on dips' mode, with 1.09 up to 1.0940 a major hurdle, followed by the next one at 1.0980 up to 1.1020; while above the former selling will probably recede, only a break of 1.1020 sees bulls re-claiming control.