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The AUDNZD rallied by +0.31% after bulls found short-term support at the 1.12500 level and the pair could rally towards the 1.1500 level, a 9-year high. The bullish run on the AUDNZD could be limited after the hawkish RBNZ delivered a 50bps rate hike as markets had anticipated. The policy divergence developing between the Reserve Bank of Australia and the Reserve Bank of New Zealand will weigh near-term bulls.
Furthermore, Australia’s recent negative economic data continues to weigh the pair down. The August Trade balance dropped to 8.324B from an estimated 10.100B indicating slowing economic growth in August. Financial stability risks have increased over recent months as household budgets and business cashflows continue to skyrocket while housing prices continue to decline. This could spell bad news for the Australian dollar as the RBA pivots its monetary policy tightening amid soaring inflation.
Technically, a break above the 1.1500 level could reinforce the current outlook on the pair in the near term. There will be a release of Westpac Consumer Sentiment data next week for October along with NAB Consumer Confidence. From New Zealand, there will be a release of Business NZ PMI data on Friday next week.
Monthly Chart Analysis
The AUDNZD retracted from a 1.1500 level, a 9-year high and the pair may experience a short-term retracement in the near term. The RSI indicator reading dropped from the 70.0 level as bulls entered an overbought level. The pair could retrace towards the 1.10000 level, a previous resistance-turned-support.
However, a break above the 1.15000 level could trigger buying pressure towards the 1.2000 level. A hold above the 1.10000 support level could give bulls the reinforcement needed to break above the 1.1500 near-term resistance.
ActivTrader Sentiment tool suggests that 83% of retail traders are bearish on the AUD. Technically retail traders could be pricing in on a near-term retracement from the 9-year high. Moreso, the RBA monetary policy pivot could also underpin the current sentiment as markets price in a dovish outlook for the pair in the near term.
However, a further drive above the near-term high at the 1.1500 level could invalidate the bearish outlook as bulls break away from the 9-year range between 1.1500 and 1.000 level. Australia’s Westpac Consumer Sentiment data due for next week will be key in stirring the near-term sentiment.
4-Hour Chart Analysis
The AUDNZD managed to recover gains from the 1.12500, a previous support-turned-resistance. The trend is dominated by bulls in the near term as indicated by a MACD indicator. The MACD indicator reading is above 0.000, a neutral level indicating the pair has more room to rally to the upside. A break above the 1.1325 level has reinforced the bullish outlook and upside gains are capped by the 1.1400 and 1.14500 levels.
However, a failure to trade above a 1.1370 barrier, coinciding with a 50-day moving average (blue) could soon trigger selling pressure on the pair back below the 1.1325 level. A break below the 1.12500 level, coinciding with a 200-day moving average (Magenta) could reinforce a bearish outlook and the near-term target will be at the 1.11000 psychological level.
