Kiwi & Aussie Diverging – Long NZD & Short AUD?

Posted Thursday, April 20, 2017 by
Skerdian Meta • 1 min read

NZD and AUD usually go hand in hand which is not suprising. Their economies are connected as they´re the only two land masses in their area and consequently have to do buisness together. They´re also both dependent on exports of raw material to China.

But over the last few days these two major currencies have been diverging. The Aussie has become the weakest currency, with AUD/USD losing more than 100 pips while the Kiwi has remained quite resilient.

The 50 SMA is working

The economic data has also helped these forex pairs diverge. The RBA (Royal Bank of Australia) meeting minutes last Tuesday were a bit dovish, which cast a shadow on AUD pairs, hence the downtrend in AUD/USD this week.

The New Zealand Q1 GDP report on the other hand, showed a 1% growth according to the numbers published last night. The last reading was 0.4% and expectations were for a 0.8% increase, so that was the reason for the 50 pip jump in NZD pairs last night.

So, we can see that these two neighbouring currencies have been diverging this week. When I want to trade one of these pairs I always check the other one to look for clues as to which one is the weakest when selling or the strongest when buying.

Buy at the 100 SMA (green)?

Now, unfortunately, we can´t compare them anymore, at least not until they start correlating positively again. Until then, we will remain dovish on AUD/USD and bullish on NZD/USD   

By the way, our AUD/USD signal which we opened a while ago is going pretty well at the moment, so let´s see if we can find a buying spot for NZD/USD. 

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