- RBA priced in for additional rate hikes while RBNZ could be at its peak.
- Golden cross could lead to more AUD support.
AUSTRALIAN/NEW ZEALAND DOLLAR FUNDAMENTAL BACKDROP
The Australian dollar gained ascendency against its island counterpart the New Zealand dollar after Australian jobs data reflected a robust labor market. In addition, Chinese optimism due to proposed support structures for the economy could bolster the AUD further due to its close ties with China in the form of commodity exports.
From a central bank perspective, both the RBNZ and RBA are adopting a wait and see approach to their monetary policies` but the RBA did state in their recent RBA Minutes release that further tightening may be required if inflation proves more persistent than initially forecasted. Looking at interest rate probabilities between the two central banks, the RBA has roughly 45bps of additional hikes priced in while the RBNZ looks to be at its peak. Based purely on interest rate differentials, the current backdrop favors the Aussie dollar.
AUD/NZD TECHNICAL ANALYSIS
AUD/NZD DAILY CHART
Price action on the daily AUD/NZD chart above shows a golden cross formation (green) developing and has already produced some uptick from AUD bulls – which I expect to rally further. In addition, the Relative Strength Index (RSI) has recently edged above the 50 mark which suggests short-term upside momentum.
Key resistance levels:
Key support levels:
- 1.0834/50-day MA (yellow)
- 200-day MA (blue)