First and foremost, risk currencies have over the past two months, been a very positive long trade as DXY and macroeconomic risks unwounded.
However, over the past week several events negate the upside movements these being;
First, central bank commentary specifically the RBNZ and RBA on local currency appreciation and what it might do to this movement in the coming 12 months:
RBNZ: “The lower New Zealand dollar exchange rate this year is also providing a useful additional offset to the weaker global economic environment.” This is something the Board wishes to continue into 2020 and shows that those with longer term trade views will shift to a dovish stance on NZD.
RBA: “We can’t ignore structural shifts in global interest rates. If we did seek to ignore these shifts, our exchange rate would appreciate, which, in the current environment, would be unhelpful in terms of achieving both the inflation target and full employment.” Jawboning, rate cuts and possible QE in 2020 are clearly on the cards from the RBA and thus, like its trans-Tasman peer see traders turn dovish on the AUD in 2020.
Second, several long-term technical trends were tested and failed to show that there is some fatigue starting to play out.