When analysing the foreign exchange market, we see some informal yet frequent classifications. One of the most common is the classification by trading volume, according to which we distinguish between major currencies, so-called majors, minor currencies and exotic currencies. Commodity currencies can also be distinguished on the market.
Commodity currencies are of great importance in the context of international exchange. This is the name given to currencies of countries whose economies are dependent on raw materials such as oil, gas or iron. They are primarily exporters of industrial raw materials. An example of a commodity currency is the Canadian dollar CAD and its well-known dependence on oil prices.
The national currencies of Australia and New Zealand, i.e. the Australian and New Zealand dollars, are also classified as commodity currencies. The reason is obviously dependence of these countries on export of fossil raw materials in case of Australia, and agricultural raw materials (milk and processed products) from New Zealand.
The Australian economy is heavily dependent on exports of raw materials to their main market China. This is particularly noticeable in the case of iron ore prices. When ore prices started to fall at the beginning of April this year – the AUDUSD exchange rate also went south. Currently we are observing new covid-19 outbreaks in China and introduced restrictions in the form of isolation of entire districts in Shanghai and other cities – which is slowing down industrial production and reducing demand for imported raw materials.
Another factor influencing AUD exchange rate are declines on stock exchanges, an indicator of which may be SP500 index, which has already lost over 20% since the maximum this year. If the situation in China does not improve, the Australian dollar may continue to be under selling pressure.
AUDNZD – the pair returns to consolidation?- technical analysis
Analyzing the AUDNZD chart from a purely technical point of view, we notice an inside bar formation on the W1 – weekly chart. MACD oscillator tends to enter the downward phase. It is likely that the price will break out from the bottom of this formation and move towards the trend line (red).
On the daily chart we can determine an uptrend, which took the form of an upward channel. If the support of the channel is defeated it will lead to the demand zone 1.0880. If the demand zone surrenders to the selling pressure – the next supply target may turn out to be the line of the upward trend marked in red.
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The above analysis is based on the PA+MACD strategy, a detailed description of which you can read HERE . I will talk more about the PA+MACD strategy applied to these currency pairs during the live trading sessions which you can attend from Monday to Friday.
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