Is hunt for yield keeping AUD/NZD undervalued?

The AUD/NZD looks under-valued with respect to commodity prices and relative interest rates, but this might be explained by the extreme low global yield environment, says Greg Gibson, the founder of Amplifying Global FX Capital.

Ten-day losing streak

The cross is down for the tenth consecutive session today. As per Greg Gibson, the underperformance of the Aussie could be blamed on weak copper price and under-performing Chinese currency, while attractiveness of Kiwi as the high yielding major was bolstered further after RBNZ’s Wheeler dismissed necessity of aggressive easing.

Gibson notes, “Wheeler says no need for Rapid Interest-Rate Cuts - This feeds straight into the bullish argument for NZD, suggesting that RBNZ rate cuts are not expected to seriously change the high yield status of the NZD.

AUD/NZD Technical Levels

The cross was last seen trading just below 1.04 levels. Breakdown of immediate support at 1.0363 (July 4 low) would open doors for 1.0338 (July 7 low), under which psychological level of 1.03 could be put to test. On the higher side, resistance at 1.0436 (Aug 2 low) if breached could yield a rally to 1.05 (zero figure) and 1.0535 (50-DMA).