- AUD/NZD accumulated at the 23.6% Fibonacci retracement.
- Market pricing for RBNZ is for 18bp of easing on 13 November and markets are pricing 19bp of easing at the 1 October RBA meeting.
AUD/NZD has been creeping lower down through the 1.07 handle as the outperformer, NZD, continues to correct and trades on the bid following Reserve Bank New Zealand governor Orr’s speech yesterday. AUD/NZD is currently trading at 1.0722 and consolidating after a slide of over 0.60% overnight from 1.0770.
Yesterday, the Monetary Policy Committee agreed that the new information since the August Monetary Policy Statement did not warrant a significant change to the monetary policy outlook and it would appear that the RBNZ is relatively upbeat on the current levels of demand in the economy and that any risk of QE appears distant.
“In our view trade tensions between the US and China are unlikely to be fully resolved by next month high levels talks and we expect headwinds to growth to remain substantial. We continue to see risk that the RBNZ will be again pressured into cutting rates in the months ahead,” analysts at Rabobank argued.
RBA to play catch up with RBNZ
Market pricing for RBNZ is for 18bp of easing on 13 November, with a terminal rate of 0.60%. Meanwhile, Australian 3-year government bond yields ranged sideways around 0.68% while 10’s travelled between 0.94% and 0.98 % and markets are pricing 19bp of easing at the 1 October Reserve Bank of Australia meeting, and a terminal rate of 0.45% which should weigh on the cross as the RBA plays catch-up with the RBNZ.
AUD/NZD levels
The cross is accumulated at the 23.6% Fibonacci retracement of the August uptrend while trading below both the 40 and 20-day moving averages. The next key target comes as the 38.2% Fibo down at 1.0620.
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