NZD and AUD Diverging After RBNZ – Fancy Trading Crosses?

Written by: Skerdian Meta • Thursday, June 22, 2017 • 2 min read

• Last updated: Thursday, June 22, 2017

Commodity currencies usually go hand in hand with the neighboring AUD and NZD. They are usually, almost, in perfect correlation.

But on Tuesday, the correlation started to wane and today it looks like the correlation has been thrown out of the window. AUD/USD is almost unchanged and still on the back foot, while NZD/USD is about 50 pips higher since last night.

The reason for this is the RBNZ (Royal Bank of New Zealand). Yesterday the RBNZ left the interest rates unchanged at 1.75% which was what everyone was expecting.

But forex traders weren´t expecting a hawkish statement. Actually, most major central banks have turned hawkish recently given the better global economic conditions and higher inflation.

The statement was mostly unchanged, but there were enough hawkish comments there to get NZD bulls excited.

The Kiwi as been appreciating recently, but despite that, trade is near an all-time high in New Zealand. Some were expecting more jawboning by RBNZ for the NZD, but they kept pretty quiet about it. This is obviously positive for the Kiwi, hence the 50 pip overnight climb.

As I mentioned above, the correlation between the Aussie and the Kiwi has been broken today, which makes you assume that it would be safer trading AUD/USD than NZD/USD.

So, I´m looking to sell NZD/USD. I´d like to open a long-term sell forex signal since the trend has changed in this forex cross, but I´d prefer to see a retrace higher before going short. The area where the moving averages are clustered seems like a good enough place, but they´re a bit too far so let´s give it some time.

The change in the trend is very clear

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ABOUT THE AUTHOR See More

Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.