Aussie Dollar (AUD/USD, AUD/NZD) Analysis

AUD in focus ahead of the RBA minutes as risk assets march onRBNZ highly unlikely to move on rates as inflation remains above targetMain risk events: RBA minutes, RBNZ rate decision, Fed speakersThe analysis in this article makes use of chart patterns and key support and resistance levels. For more information visit our comprehensive education library

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Aussie Dollar in Focus Ahead of RBA Minutes as Risk Assets March on

The Aussie dollar holds around the pre-pandemic low of 0.6680 as the impressive bullish continuation unfolds. The bullish pennant, which developed from early to mid-May, revealed a strong bullish continuation which was largely influenced by the move lower in US inflation.

Price action holds at elevated levels after intra-day pullbacks were repelled before testing the 0.6644 level that previously capped higher prices. In a week where that sees a notable drop-off in the number of ‘high importance’ data, volatility may wane and the US dollar may stand to benefit from a gradual recovery. Conditions of lower volatility tend to see a move towards higher yielding currencies, something that could see the US and Kiwi dollars find some respite.

Holding above 0.6680 keeps the door open to a bullish advance while a break below 0.6644 places the recent bullish momentum into question.

AUD/USD Daily Chart

RBNZ Highly Unlikely to Move on Rates as Inflation Remains Above Target

The Reserve Bank of New Zealand is all but certain to maintain interest rates at a 15-year high in the early hours of Wednesday morning, with markets pricing in less than 4% change we’ll see a rate cut.

The bank is likely to require greater confidence that inflation is moving back towards the 1-3% range before deciding to cut interest rates and markets anticipate the first of such adjustments to take place in Q4. Inflation sits at 4% - a level that remains too high for the central bank to hint at looser financial conditions.

Implied RBNZ basis point moves per meeting

The AUD/NZD chart broadly presents an uptrend which has slowed down in the second quarter of the year. Negative divergence has appeared (lower highs on the RSI, whilst price action printed a higher high), suggesting a longer-term slowdown in momentum which may ultimately result in a reversal of the longer-term trend. It is also worth noting the potential forming of a head and shoulders pattern but remains far from completion.

However, on a shorter-term basis, price action reveals the potential for another leg higher. On Friday, prices hovered around the 50-day simple moving average (SMA) where it appeared to launch a bid higher. Today, the pair is moving higher and the last three candles (including today) appear on track to form a morning star formation – potentially.

Should the bullish pattern emerge, the swing high of 1.1030 reemerges as the next level of resistance, followed by 1.1052 – the June 2023 swing high. The move will need to be reassessed in the event prices close below the 50 SMA or test 1.0885.

AUD/NZD Daily Chart

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Main Risk Events this Week

There is a sizeable number of Fed speakers this week so things could get a little noisy in dollar crosses including AUD/USD. In addition, US Treasury Secretary Janet Yellen is due to make an appearance while the RBNZ rate decision and RBA minutes provide the main antipodean data for the week. On Friday, keep an eye on the final University of Michigan Consumer Sentiment report after the preliminary figures shocked markets.

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