Bounce in Commodity Dollars (AUD, NZD) – Is China Stimulus Working?

Yesterday we saw some decent gains in commodity dollars such as the NZD, AUD, and CAD, as Chinese stocks bounced higher. Fundamentals from Australia and New Zealand have also helped the sentiment for the New Zealand Dollar and Australian Dollar, with the RBA (Reserve Bank of Australia) saying that they might raise interest rates if necessary, although it certainly won’t happen, and the positive Q4 employment report from New Zealand that was released last night. However, this is unlikely to last since markets continue to be driven by the USD sentiment.

Both the Aussie and Kiwi turned bearish at the end of December, losing around 4 cents since then. We witnessed stabilization around for two weeks, with the USD taking a breather ahead of the FOMC meeting which took place last Wednesday, but last week’s strong NFP jobs news from the US sent both pairs tumbling more than 100 pips down, making a bearish break below the support area.

AUD/USD Chart H4 – Back Above 0.65

Nevertheless, yesterday we saw some decent gains in both pairs after some positive news for these commodity dollars. The AUD buyers returned after yesterday’s RBA meeting which was more hawkish than the markets had anticipated. They expect inflation to slow down very gradually from here and threw another rate hike comment in, which sent this forex pair to 0.6520.

The NZD also received some positive news from the Q3 employment report, showing just a tick higher in the unemployment rate, from 3.9% to 4.0%, beating expectations of 4.2%. The pace of job growth increased by 0.4%, surpassing expectations of 0.3%, while the Labour Cost Index (QoQ) rose by 1.0%, exceeding the anticipated 0.8% increase.

Bounce in Chinese Stocks

The Chinese stock markets have been declining since the pandemic started in 2020 and the main index in China, the Shanghai Shenzhen CSI 300 has lost nearly half its value. However, in the last two days, we have seen a strong bounce from 3,100 points to 3,300 points, which means around 7.5% gain in two days. This might be a result of the Chinese stimulus from the PBOC which cut the RRR rates by 0.50%. That’s great news, but now buyers are facing the 50 daily SMA (yellow). If they can push it above the 50 SMA, then the AUD and the NZD might have a chance, otherwise this will be another retrace before the downtrend resumes again.

AUD/USD Live Chart