Since the high on May 12th, the Aussie has been giving back its gains to the weaker Kiwi. Price has now retraced the rally from the 4.21 low @ 1.0039 and 5.12 high @ 1.0882 near the Fibonacci 38.2% retracement level @ 1.0557. This level coincides with a long running balance line rising across the chart. After nearly striking this price level, price reversed, broke its short term trendline and has now re-tested it and moved higher. This price action should set the stage for another rally in AUD/NZD.
From a fundamental perspective, the two countries central banks are in a different strategic position at the moment. While both countries struggle with deflation, the RBA has already cut rates, and the market has already priced in a future cut. The RBNZ has not cut, and the market is anticipating a cut will happen this year to weaken the currency in a world where other currencies are already made weaker. Poor export numbers on lower dairy prices are also influencing this perception.
A close above the 5.12 high @ 1.0882 can be the beginning of a big rally with the next resistance level in the 1.1250 area.
From a fundamental perspective, the two countries central banks are in a different strategic position at the moment. While both countries struggle with deflation, the RBA has already cut rates, and the market has already priced in a future cut. The RBNZ has not cut, and the market is anticipating a cut will happen this year to weaken the currency in a world where other currencies are already made weaker. Poor export numbers on lower dairy prices are also influencing this perception.
A close above the 5.12 high @ 1.0882 can be the beginning of a big rally with the next resistance level in the 1.1250 area.