AUD/NZD rallies as RBNZ signals dovish shift

Source Fxstreet
Jul 10, 2024 19:50
  • AUD/NZD witnessed a significant rise to 1.1090, to multi-year highs.
  • The RBNZ kept rates steady at 5.5%, signaling a willingness to ease sooner rather than later.
  • RBA and RBNZ policy discrepancies might favor the AUD.

On Wednesday, the AUD/NZD rose to a fresh high since 2022, in reaction to the Reserve Bank of New Zealand (RBNZ) decision.

The RBNZ, as expected, kept the Official Cash Rate (OCR) anchored at 5.50%, but hinted at potential rate cuts in the near future. The RBNZ highlighted the signs of easing inflation persistence and the expectation of headline CPI returning to target in the second half of the year. Moreover, it addressed the impact of tight policy measures on the economy and deviated from the May 22 meeting where Governor Orr confessed that a hike was a "real consideration".

Following the decision, a rate cut is now priced in October, with the market pricing in nearly 60% odds of an earlier cut in August. On the other hand, while the Reserve Bank of Australia (RBA) seriously considers a hike, the pair may see more upside.

AUD/NZD technical analysis

In the short-term, the AUD/NZD maintains a bullish momentum due to the recent rally but overbought conditions seen in the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) indicate that a correction may be imminent.

Support levels have moved and now stand at 1.1050, 1.1000, and 1.0950. The next challenge for buyers is to reach and retain the 1.1100 target point.

AUD/NZD daily chart

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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