AUD/NZD forms a bearish-engulfing candle around weekly tops, as bears eye 1.0700 ahead of RBA’s SoMP

The AUD/NZD retreats from a weekly high at 1.0770 during the day to 1.0715 at the time of writing. On Thursday, the FX complex benefitted risk-sensitive currencies, though, in the pair, the NZD was in charge.

The Australian dollar was on the wrong foot on Thursday. In part, RBA’s stubbornness to push back hiking rates despite ending the Quantitative Easing (QE) program boosts the NZD, which is on its way for the third consecutive rate hike in each of the last three RBNZ meetings. Central bank policy divergence between the RBA and the RBNZ would favor the latter.

In the meantime, at 00:30 GMT, the Reserve Bank of Australia (RBA) would unveil its State of Monetary Policy (SoMP) report to update its forecasts, and that would provide AUD/NZD traders some impetus if it gives any hawkish signal. Market participants widely expect it to maintain a dovish stance.

Meanwhile, the economic docket for New Zealand just featured Building Permits for December on its monthly reading. The figures came in line with the previous reading, up 0.6%.

AUD/NZD Price Forecast: Technical outlook

The AUD/NZD remains upward biased, though it faced strong resistance around 1.0770 on Thursday, at the beginning of the Asian session, a level that could not be recovered through the day. That said, the AUD/NZD pair formed a bearish engulfing candle pattern that covers the price action of the last two trading days.

That said, the AUD/NZD in the near term is downward biased, and its first support would be 1.0700. A breach of the latter would expose January 28 daily low at 1.0655, followed by the January 24 cycle low at 1.0632.