AUDNZD and the idea of trading close neighbours

[FXS London Scalper]

AUDNZD pairs two economies with similar exposures to commodities and China, which tends to keep the cross in long ranges with occasional trends driven by policy divergence. Its behaviour differs from either currency against the dollar.

One idea traders explore is mean reversion: when the cross moves far from a long moving average, look for a return. The risk is that a policy divergence turns a stretch into a trend lasting months.

A method to evaluate: compute the distance from a 100-day average in standard deviations, mark extremes, and record what happened over the next 20 days. Separate periods where the RBA and RBNZ were moving in the same direction from those where they diverged.

Swap costs matter here, since holding for weeks accumulates interest differentials. Including them in the test can change conclusions.

Spreads on this cross are usually wider than on majors, so short-term strategies may struggle.

What has your experience been with this pair or similar crosses?