- AUD/NZD pair is subdued ahead of the RBA monetary policy statement.
- RBA to keep rates unchanged and abandon yield curve control.
- Would the central bank drop the calendar reference, or stay put with it?
The AUD/NZD slides as the Asian session begins, down 0.10%, trading at 1.0476 at the time of writing. Later on Tuesday, the Reserve Bank of Australia will unveil its monetary policy statement. Market participants are expecting no change at the cash rate. Regarding forward guidance, most economists expect a drop of the calendar reference, as expressed in the last monetary policy meeting when the bank told conditions for a hike rate “will not be met until 2024.”
According to ANZ analysts, in a note to clients, said: “The problem with dropping the calendar reference is that it will likely encourage the market to solidify its expectation that rate hikes will happen in the early part of 2022.“ Concerning the Yield Curve Control, ANZ expects that the RBA would not use additional Yield Curve Control.
The base case scenario for the RBA is to hold rates, abandon the Yield Curve Control (YCC), and drop the calendar reference in the forward guidance. In the abovementioned outcome, the AUD/NZD pair would be under intense buying pressure, which would target 1.0500, followed by the 100-day moving average at 1.0520.
On the flip side, if the RBA holds rates, drop the Yield Curve Contro (YCC) but sticks to the calendar reference of 2024, the AUD/NZD could tumble towards 1.0400.
AUD/NZD Price Forecast: Technical outlook
Daily chart
The AUD/NZD has a downward bias, as shown by the daily moving averages (DMA’s) above the spot price, except for the 50-DMA lying at 1.0423. The Australian dollar recovered some ground against the kiwi, supported by a rising slope trendline that travels from the September 16 low towards the October 22 low, which Is support.
For NZD buyers to accelerate the downtrend, they will need a daily close below the 1.0400 level. In that outcome, the first support level would be the September 21 resistance now turned support, at 1.0361.
On the flip side, AUD buyers will need to reclaim the 100-DMA at 1.05200. A breach of the latter would exert upward pressure on the AUD/NZD, leaving the 200-DMA exposed as the first resistance level at 1.0640.
Nevertheless, the pair has not been trading solely on technicals. Recent developments between both central banks have kept both currencies fighting, within a 1.0400 – 1.0500 range, without any clear trend, but the NZD has the upper hand, as it lifted interest rates, leaving the AUD trailing.
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