AUD/NZD is on the verge of a significant technical correction

• AUD/NZD bulls are stepping in at support with sights on a 38.2% Fibo. 
• RBA and GDP will be the focus this week for AUD.

AUD/NZD slipped from 1.0680 to 1.0650 on Friday while the Kiwi collapsed in a technical reversal, with the Reserve Bank of Australia buying-up bonds as the Reserve Bank of New Zealand clarified its remit.

For the week ahead, data will be important with Australia reporting its December quarter on Wednesday where another strong gain in Gross Domestic Product, rising 2.2% QoQ expected, could help to support the correction in the pair.

 Meanwhile, Tuesday’s RBA statement is expected to emphasise that the central bank has the option of increasing the size of QE if needed. Observers will also be watchful over the language around the AUD.

Analysts at ANZ Bank explained that inflation in Australia has quickly picked back up to where it was prior to the pandemic. ”From here, we think it’s more likely to rise gradually over the next few years than to surge in the short term given the substantial tightening in the labour market that would be necessary. That said, we think inflation could surprise on the upside, particularly from housing-related pressure, given how strong the residential market is shaping up to be.”

AUD/NZD technical analysis

The price is consolidating and could be on the verge of a significant correction.

AUD/NZD daily chart:

AUD/NZD hourly chart:

From an hourly perspective, with a focus on the 38.2% Fibonacci target, bulls need to clear the overhead resistance and in doing so,the technical environment will become bullish.