- AUD/NZD outlook into the RBNZ event is bullish on a 25BP hike.
- Traders are fully pricing in a 25bp hike, although 50bp is the biggest risk.
The RBNZ meets today and analysts are overwhelmingly expecting a 25bp hike rather than 50bp. This is where the risk is for the cross. A 50bp increase will see the kiwi fly considering the market has clipped it wings on the basis that a hike has been well telegraphed for a long time
This brings us to the charts:
AUD/NZD daily chart
For the near term, this is the potential outlook for today's main event. Given the market will not be surprised that the RBNZ hikes, a move higher would not be unrealistic, especially as traders factor in the path of central banks in general. The RBNZ’s OCR track will be key in determining how far the kiwi could fall.
If there is a tendency towards an endpoint near 3% but dovish rhetoric, in so much that 25 bp OCR rate hikes will possibly be all we will get from the RBNZ between now and then, this leaves plenty of room for the RBA to catch up. Thus, there could be more value in the Aussie moving forward should a 2023 rate hike remain a possibility if inflation, wages and growth surprise to the upside.
In the event that there is a 50bp hike, there will be the toss-up between how detrimental this might be for the economy vs what this will mean to a market that is already long of NZD. The knee jerk will undoubtedly see a bid in the kiwi, especially as markets are nervous going into the meeting and waiting on the sidelines, waiting to pile in on such an outcome.
AUD/NZD H1 chart
The price would be expected to extend distribution that has started to take place ahead of the meeting. A break of the dynamic support would open the risk of a knee-jerk run on 1.0380 and then 1.0320 stops.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD turns negative near 1.0760
The sudden bout of strength in the Greenback sponsored the resurgence of the selling pressure in the risk complex, dragging EUR/USD to the area of daily lows near 1.0760.
GBP/USD comes under pressure and challenges 1.2500
GBP/USD now rapidly loses momentum and gives away initial gains, returning to the 1.2500 region on the back of the strong comeback of the US Dollar.
Gold retreats from highs on stronger Dollar, yields
XAU/USD trims part of its initial advance in response to the jump in the Dollar's buying interest and the re-emergence of the upside pressure in US yields.
XRP tests support at $0.50 as Ripple joins alliance to work on blockchain recovery
XRP trades around $0.5174 early on Friday, wiping out gains from earlier in the week, as Ripple announced it has joined an alliance to support digital asset recovery alongside Hedera and the Algorand Foundation.
Week ahead – US inflation numbers to shake Fed rate cut bets
Fed rate-cut speculators rest hopes on US inflation data. After dovish BoE, pound traders turn to UK job numbers. Will a strong labor market convince the RBA to hike? More Chinese data on tap amid signs of slow Q2 start.