Higher inflation expectations helped cap AUD/NZD’s rally ahead of tonight’s RBNZ meeting. But with the trend favouring further upside, it could be too soon to write off another push higher just yet.
Like all good neighbouring countries, there’s a friendly rivalry between Australia and New Zealand. Whether it’s over sport, culture or (specifically with these two) who invented the Pavlova, we can’t exclude currencies from the list whilst AUD/NZD’s sits near a 7-month high.
We can see on the daily chart that two prominent swing lows have formed since 1.0488, both of which provoked strong bullish reactions around key Fibonacci levels. Earlier in July we highlighted its bullish potential although warned of a pause in trend. Interestingly, whilst the bearish pinbar and 6-day count mentioned did lead to a 3-day retracement, it took 25-days days in total before the cross broke to new highs. And following a breakout of such a long compression pattern, we’d hope for momentum to persist.
May’s high is currently providing support around 1.10, although if it were to break lower the 1.0970/75 highs could come to the rescue. Momentum remains predominantly bullish and is accelerating away from the lower trendline within a channel. It’s also comforting to see the trajectory of the current leg match that of its predecessor, which keeps 1.1140 in focus for an eventual target. That is, of course if it can break the January’s structural highs.
Although we’ve not flagged it as a high volatility event, RBNZ hold their OCR meeting at 10pm UK. With markets expecting a slightly dovish edge, it leaves NZD vulnerable to spikes higher if this doesn’t turn out to be the case. And that could bring a sense of pride to the Kiwi’s if AUD/NZD rolls over.
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