July 26, 2021 14:34:47
We highlighted AUD/NZD the week before last and how it was pulling back from a breakdown. Hot Kiwi inflation figures had just been released and it’s the turn of its antipodean brother this week. Wednesday’s data sees analysts forecasting headline Australian CPI grew 3.8% y/y with fuel and food boosting the CPI.
The RBA is currently sticking to its dovish stance and markets are only pricing in 40bps of rate hikes in the next two years. This compares with 100bps for New Zealand so there looks to be some room for some upside surprise. This would in turn shift the RBA’s outlook, though we may need to see more than one strong CPI print.
AUD/NZD downtrend pausing for now
The pair rebounded after the Kiwi inflation report, but any rallies are proving short-lived. Resistance sits around the June lows at 1.0620 which coincides with a Fib level of the December to March move. Sellers seems to be in the ascendancy with prices not able to gain any kind of foothold above 1.06.
The February low is key support at 1.5040 with another Fib level just below here at 1.0531. Interestingly, the daily RSI has eased oversold conditions but has not bounced more significantly like it has when it has dropped below 30 in the recent past. Momentum remains bearish so a solid break of the support zone could see the start of December low at 1.0418 fairly quickly.
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