AUD/NZD Stalling at 1.0750 Ahead of RBNZ

AUD/NZD Stalling at 1.0750 Ahead of RBNZ

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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.

AUD/NZD 4H Chart 1/28
audnzd 4h chart 1/28
(click to enlarge)

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.
aus cpi q4 2014
(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.

Anticipating RBNZ:

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.

AUD/NZD Daily chart 1/28
audnzd daily chart 1/28
(click to enlarge)

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.

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About Fan Yang

Fan Yang has been a forex trader since 2007. He attained his Chartered Market Technician (CMT) designation in 2010 and continues to trade and serve the Forex community by sharing his market outlooks.

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