AUD/NZD technical breakout on RBA rate hike

The Reserve Bank of Australia (RBA) surprised markets with its first interest rate of the new tightening cycle by hiking 25bps to take rates from a record low 0.1% to 0.35%. Market expectations were for a hike of only 15bps. The central bank will also stop reinvesting proceeds of maturing bonds, which means it will begin quantitative tightening. In addition, the RBA updated its inflation forecast for 2022 to 6% from 5.1%. See my colleague Tony Sycamore’s recap here. As a result of suddenly turned hawkish RBA’s surprise decision, AUD/NZD has broken out above some key technical levels.

On a weekly timeframe, AUD/NZD had been trading lower in an orderly channel since October 2013 (green lines). After testing the upper trendline of the channel over the past few weeks near 1.0925, today’s news caused the pair to burst higher and take out the top trendline of the channel. In addition, AUD/NZD traded above horizontal resistance at 1.0439, reaching its highest level since August 2018! However, notice that the RSI is in overbought territory, an indication that AUD/NZD may be ready to pull back in the long-term.

Source: Tradingview, Stone X

If price does continue higher, the next resistance level on the daily timeframe isn’t until the highs from August 2018 at 1.1176. Above there, AUD/NZD can trade to the 127.2% Fibonacci extension from the highs of august 2020 to the low of September 2021 near 1.1252 and then horizontal resistance, once again, from the highs of October 2017 near 1.1290.

Source: Tradingview, Stone X

On a 240-minute timeframe, AUD/NZD had been moving higher in an ascending wedge formation. On April 22^nd, price broke below the wedge and pulled back to the 38.2% Fibonacci retracement from the lows of March 15^th to the highs of April 20^th, near 1.0825. In addition to testing the horizontal resistance at 1.0439 on the weekly timeframe, price is also testing the underside of the rising wedge. If the trendline holds and confirms the RSI on the weekly timeframe, first support is at the April 20^th lows of 1.0825. Below there, support crosses at the 50% retracement level and the 61.8% Fibonacci retracement level from the same timeframe at 1.0807 and 1.0762, respectively.

Source: Tradingview, Stone X

The RBA’s surprise hike caught AUD/NZD traders with their guard down. As a result, the pair traded to its highest level since August 2018. Watch to see if price can hold above the key breakout levels on the weekly and daily timeframes.

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. Products and services available depend on your location and the entity holding your account. Before deciding to trade forex, commodity futures, or digital assets, 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 FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.

FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.

GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.