AUD/NZD Talking Points
- Rosy Australian economic data may propel AUD/NZD higher
- The dominant AUD/NZD downtrend was overturned recently
- Technical analysis warns it may decline next, watch support
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AUD/NZD Fundamental Outlook
The Australian Dollar could have more room to appreciate against its New Zealand counterpart in the aftermath of a more dovish RBNZ. In late March, the Reserve Bank of New Zealand hinted that a rate cut could be the more likely option going forward following a downgrade in their economic outlook. This has been the case with most major central banks recently, including the Fed and ECB.
Typically tending to behave as a risk-neutral pair, AUD/NZD tends to focus more on monetary policy bets from the RBA and RBNZ respectively. The former has not declared its bias towards easing, and markets are around ¾ confident of a rate cut by year-end when looking at overnight index swaps. At its most recent interest rate decision this month, the Reserve Bank of Australia did drop hints that it is closely watching the risks.
Until higher odds of a cut may be confirmed by the central bank, the focus for AUD/NZD will be on how domestic economic news flow crosses the wires. According to the Citi Surprise Index, data crossing the wires out of Australia are tending to be rosier than those from New Zealand as of late. As such, there may be a chance that the currency pair trades higher in the interim.
Here are key event risk to keep an eye out for ahead via the DailyFX Economic Calendar
AUD, NZD Event Risk This Week
AUD, NZD Event Risk Next Week
AUD/NZD Technical Analysis
On the daily AUD/NZD chart below, the climb above the falling trend line from August (noted beforehand) appears to have overturned the dominant downtrend. From the bottom in March, prices rose 2.7% at the time of this writing. Near-term resistance at 1.0544 was also cleared, opening the door to testing the next psychological barrier between 1.0639 and 1.0670.
AUD/NZD Daily Chart
Zooming in on the 4-hour chart below shows a rising support line that has guided the pair higher in the near-term (pink line). Negative RSI divergence does show that upside momentum is fading, hinting that a turn lower could be in store next. However, I would like to see a close under 1.0398 to confirm that AUD/NZD’s upside breakout might be a false one.
You may follow me on twitter @ddubrovskyFX for updates in the Australian and New Zealand Dollars. I will be closely watching this pair ahead.
AUD/NZD 4-Hour Chart
ChartsCreated in TradingView
FX Trading Resources
— Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter