AUD/NZD Broke Half-Decade Ceiling. Tech Stocks Retreat on Sino-US Risks

AUD/NZD Analysis, Nasdaq, US-China Relations, Technology Stocks – TALKING POINTS

• AUD/NZD broke half-decade resistance and continues to ride the early-July uptrend
• Technology stocks continue to decline as US and China lock horns over tech policies
• Crude oil, commodity-linked currencies may rise at expense of the Euro, Swiss Franc

US equity markets extended what appears to be a risk-off tilt for tech-leaning stocks. Despite the Dow Jones and S&P 500 closing 1.30 and 0.27 percent higher, respectively, the information technology sub-categories curbed each benchmark’s gains. The tech-tilting Nasdaq index registered another loss, and was down 0.39 percent for the day.

The aggressive move lower appears to be in response to US President Donald Trump’s executive orders over the weekend that targeted Chinese-based technology companies TikTok and WeChat. Cross-Pacific tensions were already high, and the latest measures have only exacerbated it and added another headwind for the global economy to sail against. Learn more about the details and market impact of the executive orders here.

Be sure to follow me on Twitter @ZabelinDimitri for more updates on geopolitical risks impacting markets.

In foreign exchange markets, the petroleum-linked Canadian Dollar rose with crude oil and gasoline prices while the Euro and Swiss Franc suffered. Both European currencies appeared to have been struck with regional risk aversion after France’s central bank warned of the second largest Eurozone economy’s slowdown. This may have reinforced premonitions about a prolonged interim of slow growth before activity returns to pre-crisis levels.

Tuesday’s Asia-Pacific Trading Session

In Asia-Pacific trade, technology-leaning stocks may extend their losses as China and the US engage in tit-for-tat sanctions over the situation in Hong Kong. The dispute with TikTok and WeChat may also add to the souring geopolitical backdrop. The US Dollar may continue to nurse some of its wounds along with JPY at the expense of the Euro. AUD and NZD may rise with commodities, but how will they trade versus each other?

AUD/NZD Forecast

AUD/NZD has finally broken above a half-decade, downward-sloping resistance channel and continues to ride along the early-July uptrend. A break beyond this point with what appears to be follow-through may inspire bulls to run out of their pens and join the race. Having said, RSI is slowly creeping into so-called “overbought” territory – a reading above 70 – but it is unclear whether this will necessarily precede a pullback.

AUD/NZD – Daily Chart

AUD/NZD chart created using TradingView

--- Written by Dimitri Zabelin, Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitri onTwitter