AUDNZD has been on a rampage since bouncing off a key support zone around 1.1000. The technical outlook has begun lining up for a potential push higher and the fundamentals also appear to be behind the pair. The key test will come from an important resistance zone around 1.1300, a break of which may encourage more bulls to join the charge.
Earlier to today, NZ inflation data came in below expectations which hit the kiwi hard. NZ Q3 consumer prices rose 0.3% q/q, missing an expected 0.5% increase and bringing year-on-year inflation to 1.0% from 1.6% previously. The ensuing sell-off in NZD was due to market participants pushing back their expectations for tighter monetary policy in NZ, which was obvious from the price action in swaps and the news coming across the wires about major banks readjusting their expectations for the next interest rate hike from the RBNZ.
As we outlined earlier today, the negative effects on the kiwi may go beyond just today. It’s clear inflation in NZ isn’t running close to pace that was assumed it would be earlier in the year and more adjustment may be needed to bring the kiwi in line with current expectations.
Both commodity currencies, AUD and NZD, have received a slight boost from stronger than expected manufacturing data out of China, but positive Chinese economic data generally has more of a positive effect on the AUD than NZD. HSBC’s flash October China Manufacturing PMI came out at 50.4, beating an expected print of 50.2. This data isn’t game changing, but it may provide China bulls with some more ammo after the positive surprise from Q3 GDP numbers.
From a technical perspective, AUDNZD bounced off a critical support zone around 1.1000 which seems to have reinvigorated the pair. There is now a potential bullish crossover in daily MACD and some other techs are also looking more positive. As we have already noted, the key test for bulls will be a resistance zone around 1.1300 (see chart).
Source: FOREX.com
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