By Jake Fillipp
With everyone's eyes on this week's FOMC meeting, there is endless speculation as to how markets will react to the upcoming rate decision and the all-important policy statement. These are usually good times to step aside and look at things from a larger perspective in order to plan one's next move in what could be some explosive price action after the rate announcement. The Australian and New Zealand Dollars seem to setting up for some interesting opportunities regardless of the FOMC outcome. From a fundamental perspective, the Kiwi and Aussie have been favorites of those putting on carry trades to fund riskier investments. Unlike their central bank counterparts in Canada and the UK, Australia and New Zealand do not appear to be in a rush to cut their benchmark rates anytime soon. This will leave the Kiwi and the Aussie as the clear favorites for those putting on carry trades should risk-aversion not permeate the market along with equities and commodities like gold continuing to trade with a firm bid.
Gathering Steam for a Move Higher?
From a technical perspective, both the Aussie and Kiwi are knocking on the door of some key medium-term resistance levels. The AUD/USD pair appears to have found a base between .8660 -.8700. Daily oscillators are moving higher and two consecutive daily closes above .8850 could point to .9000 and .9100 by the end of the year, with a clean break of .9100 opening the door to a retest of multi-decade highs reached last month at .9400. The NZD/USD pair has been trading in a 400 pip consolidation range between .7400-.7800 since October. A similar daily close above .7800 in Kiwi could signal a breakout and give scope to a challenge of .8000 and a test of the highs last summer around .8120.
Charts courtesy of FX AccuChart
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