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AUD/NZD set for a decision as jobs and rate odds diverge
The RBA kept its cash rate at 4.35% in August, while the RBNZ is near fully pricing another 25 basis point hike in September after mixed employment data.
AUD/NZD is in focus as investors weigh diverging central bank signals from Australia and New Zealand, with the cross near a technically important area. Action Forex notes that the Reserve Bank of Australia held its cash rate at 4.35% in August, but its hawkish tone has faded as Q2 inflation cooled to 3.9% from 4.1%.
In response to the inflation cooling, Goldman Sachs has dropped its call for one final hike this year, and markets are pricing in next to no chance of an August move, with roughly even odds for a hike by November. Across the Tasman, Action Forex says the Reserve Bank of New Zealand has maintained hawkish guidance after hiking to 2.50% in June, with markets now almost fully pricing a further 25 basis point increase in September.
Wednesday’s employment report in New Zealand added a complication for that hawkish narrative. Employment change rose to 0.5% quarter on quarter versus a 0.1% forecast, but the unemployment rate also increased to 5.6% from 5.4%, above forecasts, leaving the labor market sending conflicting signals.
Technically, the article points to AUD/NZD testing the 100 period EMA around 1.2011 to 1.2013, where it also converges with the 0.5 Fibonacci retracement near 1.2011 to 1.2013. Action Forex says a break above would open the door to higher levels, while rejection at the EMA and 0.5 confluence would likely return price to test support around 1.1900 to 1.1950.