AUD/NZD trend in need of a health check
July 11 (Reuters) -From a technical perspective the Australian dollar's acceleration versus the Kiwi this week could be the precursor to a much-needed adjustment within the underlying AUD/NZD bull trend.
AUD/NZD has been on the rise since basing at 1.0735 on June 6. The cross has support at the 10-day moving average and so far, pullbacks against the trend have been limited by the average. The 10-day line is currently at 1.1004 and provides a target for any correction.
Wednesday's rally fell a pip shy of a 61.8% Fibonacci retracement level, 1.1105, taken off the 1.1496-1.0472 October 2022-December 2022 drop. Fibonacci retracement readings taken off the 1.0735 to 1.1104 current bull trend give pullback targets at 1.1017, 1.0963 and 1.0920.
This week's moves and volatility have been driven by a more dovish than expected steer from the Reserve Bank of New Zealand. The central bank held its key rate at 5.5% as expected but indicated that rate cuts might come earlier than previously thought.
The question is whether the RBNZ's stance warrants further AUD/NZD gains. On domestic economic strength alone, the AUD should continue to outperform and with the support of a hawkish Reserve Bank of Australia coupled with a steady to dovish outlook for New Zealand rates the answer is probably yes.
For more click on FXBUZ
AUD/NZD daily candle chart: https://tmsnrt.rs/3RYqSBp
(Peter Stoneham is a Reuters market analyst. The views expressed are his own)
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