The Aussie dollar hit its weakest in six weeks against its New Zealand counterpart Tuesday after a survey showed Australian business conditions fell sharply in February and as concerns prevailed over weaker demand from China. Technical charts suggest the Aussie could fall further in the near term to NZ$1.0484, and possibly to NZ$1.0421.
The Australian currency slipped Tuesday to NZ$1.0572, its lowest mark since Jan. 29, after the National Australia Bank reported its business-conditions index fell to zero in February from five in January.
The Aussie/Kiwi cross has weakened since Monday after Chinese data released over the weekend showed an unexpected 18.1% drop in exports in February from a year ago which resulted in a monthly trade deficit of $22.98 billion, raising the specter of falling demand from Australia's biggest export market.
Negative sentiment for the Aussie was exacerbated this morning after a Westpac Banking Corp/Melbourne Institute index of consumer sentiment fell 0.7% in March from February to 99.5 points, below the 100-point level that means optimists outnumber pessimists.
Meanwhile, demand for the Kiwi is buoyant ahead of Thursday's Reserve Bank of New Zealand interest rate decision. The RBNZ is widely expected to raise its official cash rate to 2.75% from 2.5%--the level it has been at since March 2011.
The short-term technical outlook for the Aussie/Kiwi cross is negative.
The daily Moving Average Convergence/Divergence and slow stochastic indicators are bearish, while the five- and 15-day moving averages are declining.
Also, the rate-of-change momentum indicator is falling in negative territory.
Rallies in spot AUD/NZD would be opportunities to accumulate shorts for a near-term test of support at 1.0484, the Jan. 24 bottom. A drop below 1.0484 would open the way down to 1.0421--the Dec. 5, 2005 trough.
However, the anticipated near-term Aussie/Kiwi decline would be deferred on a global daily close above 1.0759, Friday's reaction high.
At 0156 GMT Wednesday, the Aussie was quoted at NZ$1.0585 in the interbank spot AUD/NZD market.
(Jerry Tan is a regional technical analyst for Dow Jones Newswires, Asia Pacific. He has been contributing technical analysis, commentary and intelligence on currency markets to Newswires since February 2006. Before this, Jerry spent 15 years as a senior interbank forex market maker and bank proprietary trader; and 5 years as technical analyst in a brokerage firm.)
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