AUD/NZD: en-route towards May and June lows at 1.0657/70

• AUD/NZD made a fresh low down to 1.0700 on the RBNZ outcome where the Central Bank held rates steady at 1.75% but brought forward rate increase forecasts to Q2 2020 while raising its inflation forecasts.
• AUD/NZD is currently trading at 1.0735, down from the high of 1.0766.

AUD/NZD dropped below the 200 week moving average at 1.0762 for the first time in four months after this week’s jobs data that followed a series of more encouraging data of late that included, NZ GDP whereby Q2 was +1%/q compared with RBNZ +0.5%/q. We then had that CPI for Q3 that was +0.9%/q and +1.9%/y compared with RBNZ +1.4%/y.  

The unemployment rate for Q3 that was a very impressive 3.9% compared with RBNZ 4.4% which sent the bird through the 123.6% Fibo extensions of the Sep high – October lows range vs the greenback and 1.0738 vs the Aussie.  However, the RBNZ has maintained the view that there are both upside and downside risks to their growth and inflation projections, clipping the bird’s wings.

Keynotes from the statement:

• Expects to keep the OCR at this level through 2019 and into 2020.
• There are both upside and downside risks to our growth and inflation projections.
• Timing and direction of any future OCR move remain data dependent.
• Pick up in GDP growth in Q2 was party due to temporary factors, biz survey continues to suggest growth will be soft in near term.
• Says employment is around max sustainable level.
• Says level of New Zealand dollar will support export earnings.
• Says CPI inflation remains below 2 pct midpoint, necessitating continued supportive monetary policy.
• Says GDP growth is expected to pick up over 2019.

AUD/NZD levels

Analysts at Commerzbank explained that AUD/NZD is heading down towards the May and June lows at 1.0657/70 around which they expect at least temporary support to be found:

“Should this not be the case, we would have to allow for the 2015-18 uptrend line at 1.0561 to be reached. Still further down the April low can be spotted at 1.0488. Provided that the 1.0657/50 support zone underpins, as expected, a rise back towards the 200 day moving average at 1.0820 should unfold. Between the next higher 55 day moving average, four month resistance line and the current November high at 1.0890/1.0911 we expect and potential bounce to falter.”