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AUD/USD and NZD/USD -Best Way To Trade the Turn?

Last updated 4/14/2009 3:46 AM ET (GMT -5) 0 Comments - Add your comment

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Boris Schlossberg

Director of Currency Research, GFT

Latest economic data from both New Zealand and Australia showed improvement suggesting that the two Anglo Saxon  economies in Asia Pacific  may be the first to recover from the global economic contraction as they benefit from continuing Chinese demand.

In New Zealand Retail Sales for February increased markedly jumping to a gain of 0.2% versus estimates of a -0.5% loss. The month prior New Zealand sales declined by -1.10%. Meanwhile in Australia, the NAB survey of business confidence printed substantially better at -13 versus -42 a month earlier.

The better than forecast results indicate that the two commodity driven economies are experiencing far shallower recessions than the rest of the G-10 universe as Chinese demand for basic materials remains healthy. China massive stimulus program worth about 8% of the GDP is geared towards infrastructure spending which in turn is proving positive for both Australia and New Zealand.

The kiwi and the Aussie were lower in early European trade today,  but the sell off was more a function of profit taking rather than any serious liquidation. The two currencies have rallied strongly over the past week  and now face major resistance at 7400 for AUD/USD and 6000 for NZD/USD.  The two pairs could be vulnerable to a sell off should risk aversion return, but if Q1 of 2009 proves to be the bottom of the current recession and global demand begins to pick up,  the Aussie and kiwi will remain one of the better ways to play the turn.

 Where Next for Asian Currencies?

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.