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AUD/NZD Tests Ytd Highs, Eyes On CPI Tomorrow

NZD
  • The AUD/NZD has resumed its bullish move finishing the session up 0.22% at 1.1144. The cross tested the yearly highs of 1.1152 just prior to the close but was unable to break above there. The 14-day RSI hovering around overbought territory at 69.5, while the MACD indictor has been neutral for the past three session.
  • Traders betting on the AUD outperforming the NZD have been driven by expectations of a divergence in central bank policies with the RBNZ tipped to start cutting as soon at August, while the market has priced in about a 25% chance the RBZ will hike in August, with no cuts priced in until May 2025. Key data on Australia's core inflation is set to be released on Wednesday, a high inflation read could boost the AUD to new highs, while easing price pressures could lead to a reversal below 1.10.
  • Technical levels to watch today are initial resistance at 1.1152 (yearly high) a break here would open a move to 1.1200, while support rests at 1.1072 (20-day EMA) a break would signal a potential directional change and open up a test of 1.1000 (July 10 lows/ pre-RBNZ).
  • The OIS markets are currently pricing in a chance of a hike at the August meeting at 24% for the RBA, in contrast to a 69% chance of a chance in New Zealand.
  • The AU-NZ 2yr swap spread ticked higher on Monday to 5bps, just shy of the ytd highs of 7bps made on Friday.
  • Expiries: 1.100 ($427.27m) & 1.095 ($496.58m) & 1.0925 ($500m) July 31
  • Today, Australia has Building Approvals at 11:30 AEST
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