AUDNZD Pressing 1.0715 Resistance as Traders' RBNZ-Phobia Grows

Last week, we noted the almost eerie synchronized easing from many of the world’s major central banks (see “USD: ‘Losing’ the Currency War” for more). The upshot of last week’s central bank actions, in particular the BOC’s shocking cut, is that traders are growing increasingly uneasy about all central bank meetings, regardless of the official “expectations.” After all, if the BOC can cut interest rates when 0 of 22 economists were expecting it, why couldn’t other seemingly neutral central banks?

While the Fed can hardly cut its interest rate further, traders are watching Thursday’s RBNZ meeting with a wary eye. The central bank is unlikely to cut interest rates (of course, we’ve heard that before), but it could dramatically revise its language to reflect a more dovish outlook. Forward-looking traders have started to price in that potential, with NZDUSD falling to a 3-year low under .7450 and AUDNZD bouncing from under 1.0400 earlier this year.

In fact, there are a number of signs that AUDNZD may be forming a durable bottom. The dropped to a new all-time low in early January, but buyers quickly stepped in to push the pair back above 1.0420 support. The false breakdown, combined with corresponding bullish divergences in both the MACD and RSI indicators, has led to a sharp rally to 1.0700 over the last few weeks.Now, the antipodean currency pair has regained its 50-day MA and is testing the 38.2% Fibonacci retracement of its November-December drop at 1.0715.

If the RBNZ sings from its dovish hymn sheet on Thursday, AUDNZD could break resistance at 1.0715 potentially opening the door for a continuation up to 1.0800, 1.0900, or the 61.8% Fibonacci retracement at 1.0940 in time. On the other hand, if the RBNZ comes off as relatively neutral, the contrast with its commodity dollar brethren could cause AUDNZD to break its near-term bullish trend line and potentially open the door for a retest of long-term support around 1.0400.