AUD/NZD in focus amid RBA and RBNZ rate decisions

The Reserve Bank of Australia (RBA) will make its rate decision in the early hours of Tuesday, which makes the Aussie the main focal point during the Asian session.

The Reserve Bank of Australia (RBA) will make its rate decision in the early hours of Tuesday, which makes the Aussie the main focal point during the Asian session. The RBA is not expected to make any changes, so the benchmark interest rate in Australia is likely to remain at 1.5 per cent.  But the Aussie could move nonetheless, particularly if the central bank drops its dovish views. Among the Aussie pairs, the AUD/NZD will be the most interesting one to watch this week because we will also have the Reserve Bank of New Zealand (RBNZ) rate decision coming up on Wednesday night (Thursday morning NZ time). If these central banks show a clear disparity in terms of their monetary policy views then the AUD/NZD could move significantly in one or the other direction this week. Although both central banks currently hold accommodative monetary policy stances, we think that on balance the RBNZ is slightly more tilted towards the dovish side. For that reason, the AUD/NZD could be about to stage a breakout above 1.10.

Indeed, Australian macro figures over the past couple of months have been rather good at least relative to its south-eastern neighbour. For example, the latest quarterly GDP from Australia came in at a good 1.0% in early June which was better than expected and double the figure from the previous quarter, although quarterly CPI was in line at 0.5 per cent. What’s more, retail sales have grown by 0.4% for a few months in a row now and have been better than expected on all those occasions. More importantly, Aussie employment rose sharply by 50,900 month-over-month, easily surpassing expectations. These macro pointers suggest the Aussie economy is perhaps gaining momentum and if the run can be sustained then inflation could accelerate in the months ahead. This may make the RBA a little bit more hawkish at this particular meeting. If so, then there is a good chance that the Aussie may rally.

However, the RBA is likely to make mention of ongoing trade spat between its largest trading partner, China, and the US. Judging by the behaviour of the Chinese stock markets, and Trump’s claims, the Chinese economy is hurting by these tariffs. If the US tariffs are indeed weighing on Chinese demand, then this bodes ill for Australian exports to China. But as far as the AUD/NZD is concerned, the Chinese impact can be ignored. This is because China is also the largest trading partner of New Zealand. If weakness in Chinese economy is going to weigh on Aussie exports, it will weigh on NZ exports too.

Ahead of the RBA and RBNZ rate decisions, the AUD/NZD is looking constructive from a technical perspective having made a series of higher lows, both on a higher and shorter term time frames (inset shows weekly chart with higher lows since major low was formed in 2015). What’s more, price is currently above the main moving averages, making the trend objectively bullish. These technical indications therefore point to a potential breakout above resistance and psychologically-important 1.1000 level in due course. Short-term support comes in around the 1.0930 level. The more significant support is around 1.0850 where the most recent short-term low converge with the 50- and 200-day moving averages. Thus, if price were to close below this 1.0850 level then this would be a bearish outcome. But for as long as it remains above 1.0850, the path of least resistance would therefore remain to the upside.

Source: and

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Open an Account