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Australian Dollar Cross Pick 04.10.2012

Australian Dollar Cross Pick 04.10.2012

David Song, Strategist

I’ve been sticking to the sidelines on the AUDNZD as the pair was oversold coming into April, and I am still waiting for a short-term correction for a good opportunity to sell the pair. Indeed, the aussie-kiwi looks poised for a rebound as the relative strength index climbs back above 30, but I will wait for a close above the 10-Day SMA (1.2620) to start looking for a potential entry. Ideally, I would like to see a move back towards former support (1.2800) to get short, but we may see the pair struggle to get back above the 23.6% Fibonacci retracement from the 2011 high to low around 1.2650-60 as the downward trending channel from March continues to take shape. As I expect to see the AUDNZD mark fresh lows for 2012, I will maintain my bias to sell rallies in the aussie-kiwi, and we may see the pair threaten the lows from the previous year as the fundamental outlook for Australia deteriorates.

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