Parity is Imminent for AUD/NZD

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Parity is Imminent for AUD/NZD

The New Zealand Dollar has never been on par with the Australian dollar, but as AUD/NZD continues to into fresh record lows, the parity level seems inevitable.

AUD/NZD Daily Chart 4/6
audnzd daily chart 4/6
(click to enlarge)

The daily chart shows a persistent bearish market that has not lost steam and seems to be picking up the pace again last week. as price fell below 1.01. As we can see the parity level is right there and unless the Reserve Bank of Australia (RBA) removes any prospect of more rate cuts this year, the AUD/NZD seems poised to test and possibly break below the 1.00 level.

RBA vs. RBNZ:

The RBA is expected to hold the official cash rate at 2.25% and announce this decision during start of the 4/7 session. However, the bank has been leaving the door open for more rate cuts this year, and bank chief Glenn Stevens continues to talk down the Australian Dollar (a tactic central bank officials use all the time in hopes of lower the currency rate and boosting competitiveness of the country’s exports). So, the AUD remains bearish.

Now, the RBNZ is also dovish, but it did not cut rates like the RBA did this year, maintaining its OCR at 3.50% after raising it from 2.50% in 2014. It is likely just pausing a rate-hike campaign. The RBNZ chief Graeme Wheeler has also been talking down the NZD, and this has proven to pressure the currency against the USD. But against AUD, the NZD remains strong because of a less dovish monetary policy stance.

AUD/NZD 4H Chart 4/6
audnzd 4h chart 4/6
(click to enlarge)

Anticipating a Pullback:

Now, if price rallies after the RBA statement tomorrow, it might provide another chance for bears to get in. Between 1.0150 and 1.02 is a support/resistance pivot zone, the 50-period SMA in the 4H chart, and possibly the falling trendline from the March high of 1.0530. Also look for the RSI to turn over after getting in the 50-60 area as it did in March. after the break below 1.03.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.