The divergence in monetary policies between countries is starting to show its effects on the foreign exchange market and this trend could become the main theme driving currency movements for the rest of the year.
The Australian and New Zealand dollar ended slightly lower last week after gains from a promising mid-week rally were erased by domestic economic concerns, central bank decisions and waning risk sentiment .
Differences in political support are behind the deepening divisions globally in the wake of the pandemic. We are seeing significant and continued budget support in advanced economies with $ 4.6 trillion in announced pandemic-related measures available in 2021 and beyond.
As more countries clarify their monetary policies, we might see more transactions of this type that are relatively easy to take. The AUD and the NZD in particular have two contrasting policies and this has opened up an opportunity for traders to sell the AUD against the NZD.
AUD / NZD is on the verge of breaking $ 1.05 after retreating early last week to its former resistance zone at $ 1.06 which provided a very good entry point for traders. to open a short position.
On the daily chart, AUD / NZD is below the sell high of 1.081 reached on June 11. The descending trendline should act as a barrier for the buyers and keep the price lower as well.
Since being strongly rejected at $ 1.06, the price has weakened slightly and broke the intermediate support of $ 1.0540. While the price might hover around that level for a short time, the breakout nonetheless paved the way for a drop to $ 1.04, PrimeXBT analyst Kim Chua says.
About Kim Chua, PrimeXBT Market Analyst:
Kim Chua is an Institutional Trading Specialist with a successful track record stretching across leading banks including Deutsche Bank, China Merchants Bank, and more. Chua then started a hedge fund that has consistently achieved triple-digit returns for seven years. Chua is also an educator at heart who has developed her own proprietary trading program to impart her knowledge to a new generation of analysts. Kim Chua closely follows traditional markets and cryptocurrency markets and is eager to find future investment and trading opportunities as the two very different asset classes begin to converge.
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