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AUD/NZD recovers from a multi-month low as traders await RBA announcement
The AUD/NZD exchange rate remains at its lowest level since late January 2022. Fresh challenges to mood and a divide between the RBA and RBNZ confront purchasers. RBA is preparing for a 0.25 percent rate hike, but future guidance will be vital for clarity.
AUD/NZD falls to a new low since late January as bears approach 1.0590 in anticipation of Reserve Bank of Australia (RBA) Interest Rate Decisions on Tuesday morning. Thus, the cross-currency pair reverses the previous day's corrective rally in response to a broad-based decline in the Australia Dollar (AUD) amid mixed mood.
The AUD/NZD bears appeared to have lately been pulled down by recent concerns emanating from Russia and the market's uncertainty regarding the US Federal Reserve's (Fed) next move. In addition, dovish forecasts from the Reserve Bank of Australia (RBA) and prospects for additional rate hikes from the Reserve Bank of New Zealand (RBNZ) may benefit pair sellers (RBNZ).
The New York Times (NYT) reported that Ukrainian drones attacked military bases hundreds of miles inside Russia, heightening concerns of conflict. The news combines with recent hawkish predictions from the Fed and the RBNZ, as well as a dovish bias around the RBA, to keep AUD/NZD bears optimistic.
In spite of this, the RBA is expected to declare a 0.25 basis point rate hike and may signal the end of hawkish steps, which are of increasing interest to market participants. Philip Lowe, governor of the Reserve Bank of Australia, noted recently that the central bank's decision to downshift reflected monetary policy lags. The same issues face AUD/NZD sellers in light of recent robust Australian inflation data.
On Monday, Australia's AiG Performance of Construction Index for November increased to 48.2 from 43.3, while the S&P Global Services PMI increased to 47.6 from 47.2 and the Composite PMI increased to 48.0 from 47.7. In addition, TD Securities Inflation for November increased to 5.9% YoY and 1.0% MoM from 5.2% and 0.4% previously.
In the future, the RBA Rate Statement will be more significant than the Interest Rate Decision and should be closely followed for direction.
A decisive breach below the 14-month-old horizontal support zone between 1.0610 and 1.0615 would push AUD/NZD bears towards a rising support line beginning in September 2021, close to 1.0580.
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