FUNDAMENTAL OUTLOOK
NZD/USD continued its second consecutive gains through March. The sharp increase in the rate was in part due to better than expected Kiwi economic data, a dovish U.S. economic data and firming commodity prices.
Due to risk aversion and possible lower commodity prices in the near term, the outlook for the rate is neutral in the near term and lower in the medium and long terms.
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AUD/USD extended its previous month’s gains, rallying in March. The rate’s increase was in part due to firming crude oil, gold and commodity prices, a dovish U.S. Federal Reserve and mixed economic numbers out of both countries.
Due to overall improvements in the U.S. economy, as well as possible pressure on oil and commodity prices, the outlook for the rate is neutral in the near term, although the rate is still expected to move lower in the medium and long terms.
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EUR/NZD consolidated in March, gaining a mere five pips and ending the month virtually unchanged. The lack of a decisive move in either direction in the cross was in part due to both the RBNZ and the ECB unexpectedly lowering their benchmark interest rates, better than expected economic data from New Zealand with mixed numbers out of the Eurozone. European economic data was for the most part mixed in March.
Due to risk appetite favouring the Kiwi, the interest rate differential and possible further ECB easing, the outlook for the cross is neutral in the near term, but lower in the medium and long terms.
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GBP/AUD declined for its fifth consecutive month in March, falling another -1.4% overall. The decline in the cross was in part due to firming commodity and crude oil prices, mostly lower than expected UK economic numbers and increasing concern over the coming Brexit referendum which could lead to the UK leaving the European Union. UK economic data failed to meet expectation for the most part in March.
Due to continued uncertainty over the Brexit referendum, risk appetite favouring the Aussie and improving Australian economic data, the outlook for the GBP/AUD cross is lower in all time frames
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AUD/EUR extended its previous month’s gains in March, gaining +2.5% for the month overall. The increase in the cross was in part due to a rally in crude oil and other commodities, mixed economic numbers from both economies and a dovish ECB.
Due to softer commodity prices, risk aversion and improving EZ economic numbers, the outlook for the cross is neutral in the near and medium terms and lower in the long term.
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TECHNICAL OUTLOOK
NZD/USD hit a long term low at 0.6209 last August; it then rose to 0.6883 last December after breaking up from a declining channel. After a sharp correction down to 0.6347 in January, the Kiwi rose again in choppy trading to reach 0.6966 on March 30th.
Overall, NZD/USD’s outlook remains mildly bullish in the near and medium terms as it trades higher overall within a choppy upside correction phase.
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AUD/USD made a significant double bottom at 0.6827 in mid-January, the rate corrected steadily higher to peak at 0.7723 on March 30th. The rate then fell to 0.7509 by April 4th.
Overall, AUD/USD’s near term outlook neutralized to match its medium term outlook that may be in the process of turning bullish.
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EUR/NZD broke above the 1.6749 neckline and rose sharply to 1.7273 in mid-January. The cross then entered a consolidation phase above support at 1.6078 and resistance at 1.6873 within what may well be a larger pennant pattern.
EUR/NZD’s near term outlook remains neutral as it consolidates around the 1.6687, but its medium term outlook has turned mildly bullish. A possible pennant formation could signal that another sharp rise lies ahead for this cross.
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GBP/AUD peaked at 2.2368 last August, and has since been correcting lower. Once the cross’ medium term up channel’s lower support line gave way, GBP/AUD accelerated to the downside, reaching a low of 1.8457 thus far on March 31st.
Overall, GBP/AUD’s near term outlook remains bearish, although bullish RSI divergence warns of a bounce. Its medium term outlook remains bearish since the cross sustained a downside break from its medium term up-channel and fell below its falling 200 day MA.
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AUD/EUR has been rising correctively since falling to 0.6023 in August. It rose to 0.6958 in early December, but then fell to touch 0.6153 in mid-February. The cross then rose sharply to hit 0.6911 on March 9th, but it failed to sustain upside momentum and relaxed back down to 0.6596 by April 4th.
AUD/EUR’s near term outlook neutralized, and its medium term outlook is bullish, but the above wave scenario favours a decline.
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Te’a Truong | Account Manager – Partnerships | OFX
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