AUD/NZD sees slight uptick ahead of RBNZ decision, hawkish RBA

July 9, 2024 12:00 am

  • AUD/NZD opened the week mildly higher at around 1.0990.
  • New Zealand’s struggling economy still causes worries, as the market awaits the RBNZ meeting later this week.
  • The RBA continues its hawkish tone, creating a favorable outlook for the Aussie.

Following a climb to the highest level since mid-May and gaining more than 1.20% since late June, the AUD/NZD buyers stepped back to secure some gains but the pair is poised for some consolidation. The Reserve Bank of New Zealand (RBNZ)’s Wednesday meetup and while New Zealand’s economic performance still shows signs of struggle, fundamentals lean in favor of the Aussie.

In New Zealand, the focus is on ongoing concerns such as the sluggish economic outlook and the coming meetings of the RBNZ on Wednesday where a hold is priced in. Other mid-tier data this week include the Consumer Inflation expectations and NZ PMIs on Wednesday and Thursday which might fuel moves on the NZD dynamics.

Despite markets betting on a 60% probability of a rate hike by the end of the year, as shown in the RBNZ’s May rate path projection, the market strongly anticipates a November rate cut. Some even foresee an earlier cut in October, considering New Zealand’s slowing growth.

Meanwhile, in Australia, the latest hot inflation data has ramped up market expectations. The market now suggests an almost 40% chance of a 25 bps rate hike on the September 24 meeting of the Reserve Bank of Australia (RBA), rising to around 50% by November 5. The RBA recently has been contemplating raising rates, thus benefiting the Aussie.

AUD/NZD technical analysis

Short-term, the AUD/NZD maintains a bullish stance, though the looming potential for a correction as indicated by nearing overbought conditions warrants caution. The Relative Strength Index (RSI) sits close to 70 and the Moving Average Convergence Divergence (MACD) continues to display rising green bars on the chart.

Support levels lie at 1.0950, 1.0930, and 1.0900. Buyers will be eyeing 1.1000 as the next resistance target. A correction might be on the horizon, but as long as the AUD/NZD stays above the 20, 100, and 200-day Simple Moving Averages (SMA), the outlook remains favorable.

AUD/NZD daily chart

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