The AUD/NZD pair saw a significant surge to 1.1090, reaching multi-year highs, following the recent decision by the Reserve Bank of New Zealand (RBNZ). The RBNZ opted to keep the Official Cash Rate (OCR) steady at 5.50%, but hinted at the possibility of future rate cuts. This decision was influenced by factors such as easing inflation persistence and the anticipation of headline CPI returning to target in the latter part of the year. Additionally, the RBNZ acknowledged the impact of tight policy measures on the economy, a shift from the previous meeting where a rate hike was being considered.
As a result of the RBNZ’s dovish stance, the market has priced in a rate cut in October, with a 60% chance of an earlier cut in August. On the contrary, the Reserve Bank of Australia (RBA) is contemplating a rate hike, creating policy discrepancies that may benefit the Australian Dollar in the AUD/NZD pair.
Looking at the technical analysis of the AUD/NZD pair, the recent rally has led to a bullish momentum. However, indicators like the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) suggest that the pair is overbought and a correction could be on the horizon. Support levels are currently at 1.1050, 1.1000, and 1.0950, with the next target for buyers being 1.1100.
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In conclusion, the AUD/NZD pair’s recent surge can be attributed to the RBNZ’s dovish stance and potential rate cuts in the future. The divergence in monetary policies between the RBA and RBNZ may continue to impact the pair, with technical indicators pointing towards a possible correction in the near term. Investors should exercise caution and conduct thorough research before making any trading decisions in the forex market.