AUD/NZD: Bears in control within descending channel, eyes on 50% mean reversion

• AUD/NZD extending losses within the descending channel, rejected by trend resistance.
• Central Banks and trade deal are current drivers for the cross.

AUD/NZD  is currently trading at 1.0681, steady-Eddy in early Asia, albeit on the backfoot  within a bearish technical  backdrop on the daily outlook. The old adage, ‘what goes up must come down’ has been in play with the cross since its September peak while sentiment for the two central banks remains equally dovish.    

“Markets are pricing 5bp of easing at the 5 Nov RBA meeting, and a terminal rate of 0.48% (RBA cash rate currently at 0.75%). Market pricing for RBNZ is for 22bp of easing on 13 November, with a terminal rate of 0.62%,” analysts at Westpac explained.  

Looking to  political  fundamentals  and Sino/US trade relations

Meanwhile, looking to the political  fundamentals  and Sino/US trade relations, the Aussie tends to be more susceptible to the headlines and trades as a proxy to the saga. However, the latest developments should be supportive given that the sentiment is for a Phase-1 deal to be ratified as soon as next months summit scheduled to take place in Chile. The riots and protests  that took to the streets of late, mind you, could be a spanner in the works should the summit be cancelled due to escalating violent demonstrations  on the streets of Chile.  

“Under the Phase 1 deal, the White House reported that China’s purchases of US farm goods would scale up to USD40-50bn/y within a couple of years, while the US will delay a tariff increase scheduled for 15 Oct,”

analysts at ANZ Bank wrote – which would be highly supportive for the Aussie.  

AUD/NZD  levels

The cross has buckled  below the 1.07 handle and is capped on recovery attempts by the 21-DMA having been rejected by the descending  channel’s resistance at the start of the week. Bears are looking for a break to the 1.0660’s horizontal support-line  and prior lows from the month ahead of the 38.2% Fibonacci retracement level at 1.0620. The 200-day moving average is located down at the 50% mean reversion level of the Aug to Sep swing-highs at 1.0550.