AUD/NZD bulls rake on daily resistance ahead of RBA

AUD/NZD is a touch higher on the day by some 0.1% following a stronger performance on Monday whereby the cross rallied from the 1.0350s to test and close above daily resistance near 1.0430. 

Today’s Reserve Bank of Australia's meeting could set the scene for the foreseeable future and traders will be looking to see what the RBA might say about QE. Meanwhile, the risk-on driving forces surrounding the move higher in the Aussie were related to the better sentiment over the new covid-19 variant, Omicron. 

The variant has now been detected in at least 24 countries around the world, according to the World Health Organization (WHO). However, since the WHO designated the new Covid omicron variant as being “of concern” less than two weeks ago, preliminary results are starting to emerge that are “a bit encouraging,” the White House’s chief medical advisor, Dr Anthony Fauci, said Sunday. The top US infectious disease official told CNN that "thus far it does not look like there's a great degree of severity to it," though he cautioned that it's too early to be certain.

As for the kiwi and its underperformance on Monday relative to the Aussie and CAD, analysts at ANZ bank explained that ''FX markets seem fatigued with the New Zealand “good news” story, and are instead looking to downside risks as we head into 2022.''

''These risks could challenge our published forecasts calling for NZD/USD to level off at 0.72 in 2022.''

RBA in focus

As for the RBA today, the central bank is expected to keep policy settings unchanged at its last meeting of 2021.  ''As such, the focus will again be on the wording of the Governor’s decision statement, particularly any assessments of the latest round of economic data, including the Q3 national accounts, and the shifting external environment, particularly with respect to price inflation in developed economies,'' analysts at Westpac explained.

''The Bank’s following meeting, on February 1 next year, will likely see more meaningful shifts with a scheduled review of the bond-buying program expected to see purchases scaled back from $4bn/week to $2bn/week prior to a wind-down of the program by mid-May.''

AUD/NZD technical analysis

The inverse head and shoulders is a bullish chart pattern on this daily chart that could result in an upside continuation. The price has broken the daily resistance that would now be expected to act as a support on a retest leading into and around the RBA event today. 

With that being said, much will depend on how the Aussie performs vs. a strong US dollar:

• AUD/USD Price Analysis: Bulls look to test 0.71 the figure