AUD/NZD fell to its lowest levels since July of 2017 in early trading on Wednesday. After the Reserve Bank of Australian (RBA) left interest rates unchanged as expected on Tuesday, the Aussie lost ground to both the New Zealand and Canadian dollars.
The New Zealand dollar was lifted on Tuesday as prices for whole milk powder (WMP), the nation’s largest export, rose at a fortnightly auction. The New Zealand milk co-operative controls almost a third of the world dairy trade.
Meanwhile, threats of a trade war between the US and China continue to escalate. On Tuesday, the Trump administration released an extensive list of imports that could soon be slapped with 25% tariffs.
As China is Australia’s largest trading partner, the Australian dollar is highly sensitive to economic news impacting China. Anything that could hinder China’s growth could in turn reduce their demand for exports from Australia.
In a trade war, multiple industries stand to lose, including dairy, which would weigh on the Kiwi also. New Zealand’s largest trading partners are Australia, followed by China.
Looking at the daily chart above we can see that a bearish death cross formed in early March and that downward curving stochastics reflect bearish momentum. Potential support lies at the prior lows from June 2017 at 1.0365.