AUD/NZD has been bullish since marking a record low at 1.0353 earlier in January. Since then it has rallied to 1.0758 last week, but has stalled there and started to retreat.
The 4H chart shows that after the pullback, AUD/NZD found support at 1.0563, which was near a previous resistance area. Alos note that price eventually held above the 200-, 100-, and 50-period simple moving averages (SMAs) as well as a couple of rising trendlines projected from the lows around 1.0353.
AUS CPI: During early 1/28 session, the Australian Bureau of Statistics reported that CPI in Q4 grew 0.2% on the quarter, compared to 0.5% in Q3. Forecasts called for a reading around 0.3%. The slightly disappointing CPI data was the lowest in 2 years, since the 0.2% reading in Q4 2012. This subdued inflation rate can be attributed to the persistent decline in oil prices.
(click to enlarge; source: forexfactory.com)
If we take out the most volatile 30% of the items in the CPI data, we get what’s call the Trimmed Mean CPI. In Q4, this indicator grew 0.7%, after a 0.3% print in Q3. Forecasts called for a print around 0.5%. This suggests that despite a decline in energy prices, underlying inflation is healthy in Australia. The AUD/NZD followed with a rally, but with the RBNZ ahead, it is being tentative more than anything.
Essentially, the market is keeping its bullish outlook, but showing some resistance ahead of the RBNZ meeting scheduled to end by early 1/29 Asian session.
Let’s see if the reaction after the RBN can push out of the 1.0560-1.0760 consolidation area. If the RBNZ stays put and does not project any consideration of a rate cut, the NZD should get a boost and the AUD/NZD is likely to threaten the 1.0560 area, with risk of exposing the 1.0353 low.
A break above 1.0760 however is likely if the RBNZ’s language projects a rate cut consideration. If there is a surprise cut, this is even more likely. Above 1.0760, the daily chart shows the next resistance levels.
Above 1.0740, look for resistance around 1.0860-75 (where the 200-, and 100-SMA reside), then the 1.09-1.0940 area, which involves a psychological level, the 61.8% retracement, and a previous multi-month support area.
Previous Post by Author: Bitcoin and Litecoin in Pullback to Find Resistance