AUD/NZD Outlook – April 2015


EUR/NZD continued its sharp decline in March, adding another – 2.9% decline to its previous month’s -5.4% drop. The decline in the rate was in large part due to continued uncertainty about Greece in the Eurozone, the interest rate differential and mostly positive economic numbers out of New Zealand. While the Eurozone reported mostly mixed numbers in March, the uncertainty surrounding Greece and whether the country will be able to make a key payment to the IMF on April 9th has put considerable pressure on the cross.

On Wednesday, April 1st, the Greek government submitted a 26 page document that included a list of reforms the Greek government has proposed to its creditors. The document stated that, “The government requests a speedy and successful conclusion of the Final Review on the basis of this list, so that short term funding issues may be resolved and the current crippling economic and financial uncertainties brought to an end. This is an urgent and necessary precondition for the success of the economic and reform program.” Nevertheless, the document failed to address a number of issues and actually increased spending on a number of social programs not in the bailout program, but included 1.5B in privatizations scheduled for this year.

New Zealand numbers were on target or better than expected with some notable exceptions which included the GDT Price Index and the Trade Balance. The index showed a +10.1% gain in late February, but March’s releases were +1.1% and -8.8%, while the New Zealand Trade Balance showed a surplus of only +50M, significantly lower than the expected surplus of +375K. The RBNZ left its benchmark Official Cash Rate unchanged at 3.5% in March. RBNZ Governor Graeme Wheeler said in the central bank’s rate statement that, “On a trade-weighted basis, the New Zealand dollar remains unjustifiably high and unsustainable in terms of New Zealand’s long-term economic fundamentals. A substantial downward correction in the real exchange rate is needed to put New Zealand’s external accounts on a more sustainable footing.”

Traders will be keeping a keen eye on developments in the Eurozone concerning Greece, as well as the ECB rate decision on the 15th and the RBNZ rate decision on the 29th for a clearer picture on the direction of the cross. Due to continued problems in the Eurozone and an improving New Zealand economy, the outlook for the rate is negative in all time frames.

13th New Zealand NZIER Business Confidence
15th ECB Minimum Bid Rate, NZ GDT Price Index, Business NZ Manufacturing Index
16th G20 Meetings
17th Eurozone Final CPI, G20 Meetings
19th New Zealand CPI
20th French and German Flash Manufacturing and Svcs PMIs
21st German ZEW Economic Sentiment, EZ ZEW Economic Sentiment
23rd German Ifo Business Climate, Spanish Unemp. Rate
28th New Zealand Trade Balance
29th RBNZ Official Cash Rate, Building Consents, German Preliminary CPI, EZ Private Loans
30th Eurozone CPI Flash Estimate, NZ ANZ Business Conf.


EUR/NZD has traded generally lower since topping out at the 1.7274 level in August 2013. March saw the cross hit a fresh historic low at the 1.4128 level on the 22nd before then consolidating above that level into early April.

Longer term, EUR/NZD has thus far fallen from its major 2.5773 high of February 2009 to its recent historic low of 1.4128 seen on March 22nd of this year. Interestingly, this ongoing decline appears to have been the final downswing within a mildly declining trading range that persisted back at least as far as 1992, which was obtained by extrapolating the value of the Euro back using the values of its component currencies. This very long term pattern had an upper resistance line now drawn at the 2.5345 level and a parallel lower support line drawn around the 1.4781 level, which was just broken to the downside last month. Projecting the 10,564 pip difference between those lines from the 1.4788 breakout point yields — an admittedly rather extreme — long term target of 0.0007 for EUR/NZD (implying a EUR/USD rate of 0.0005 at a constant NZD/USD rate). Of course, the primary question remains as to whether this recent trading range break will ultimately be sustained to produce such a result over a very long term horizon.

EUR/NZD remained below its falling 200-day Moving Average in March. That key indicator is now situated at the 1.5528 level, which yields a bearish medium term outlook. Also, EUR/NZD’s 14-day RSI again exhibited regular bullish divergence at the new 1.4128 historic low. It now reads in lower neutral territory at the 38.78 level, which could mildly impede downside moves.

EUR/NZD’s medium term outlook remains cautiously bearish as the cross makes new historic lows after falling below a very long term support line. Nevertheless, regular bullish divergence on the RSI at the new 1.4128 low point signals a loss of momentum that could provoke a near term bounce or consolidation period.

MAJOR LEVELS Current level 1.4268
Resistance 1.4544/54
Resistance 1.4631
Resistance 1.4787
Support 1.4234/40
Support 1.4128
Support 1.4000 (psych)

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