The recent performance of the Australian dollar versus the New Zealand dollar has raised concerns among investors and traders following the release of the latest Reserve Bank of New Zealand (RBNZ) monetary policy statement. The AUD/NZD cross pair has experienced significant fluctuations, with the Kiwi being labeled as the worst intraday performer among major currencies. This article aims to delve into the factors influencing this shift and what the future holds for the AUD/NZD pair.
The RBNZ’s decision to keep its key short-term official cash rate unchanged at 5.50% was expected by market participants. However, the dovish tone adopted in the monetary policy statement came as a surprise, signaling concerns over the impact of high interest rates on domestic demand and economic activities. This shift in stance, from mildly hawkish to dovish, has led to a bearish sentiment towards the Kiwi, with the currency experiencing a significant sell-off against the US dollar.
Following the release of the RBNZ’s statement, the Kiwi slumped to a 4-week low against the US dollar, marking it as the weakest performer among major currencies. The sudden dovish turn by the central bank triggered a sell-off of -0.86% in the Kiwi, leading to a notable decline in its value. Additionally, the interest rate swaps market has priced in two future rate cuts by the RBNZ, causing a drop in the yield of the 2-year New Zealand government bond.
On a technical analysis front, the AUD/NZD pair has shown signs of bullish momentum, staging a breakout above its medium-term range resistance. The MACD trend indicator also supports a medium-term uptrend phase, suggesting further upside potential for the pair. If the key support level of 1.1000 holds, the AUD/NZD could see a bullish acceleration towards long-term resistances at 1.1165/1190 and 1.1430/1460. However, a failure to maintain the 1.1000 level may indicate a bearish breakout, leading to a correction towards medium-term support levels at 1.0890 and 1.0735.
The AUD/NZD pair’s performance has been heavily influenced by the RBNZ’s dovish turn in its latest monetary policy statement. While the Kiwi has faced significant downside pressure, the Australian dollar has shown resilience, potentially paving the way for a bullish trend in the medium to long term. Traders and investors will need to closely monitor key support and resistance levels in the AUD/NZD pair to gauge the future direction of the currency pair amidst evolving market dynamics.