Australian Dollar Outlook:
Australian Dollar Outlook: AUD/USD, AUD/NZD Levels Ahead of RBNZ
The Australian Dollar might discover itself caught within the crossfire of foreign exchange volatility when the Reserve Bank of New Zealand delivers its rate of interest choice on Wednesday at 00:00 GMT. With the market extensively anticipating a 25-basis level lower and subsequent pause on fee reductions, any deviation might spark volatility within the New Zealand Dollar and its cousin – the Australian Dollar – on condition that the forex pairs have traditionally shared a powerful correlation.
With that in thoughts, it is very important take inventory of the AUD/USD ranges at hand within the occasion of a financial coverage shock within the South Pacific. Should the RBNZ stray from market expectations and argue that additional cuts are warranted, the New Zealand Dollar and AUD/USD would probably fall below stress as the expansion and rate of interest expectations for the area are adjusted decrease. Consequently, AUD/USD might threaten the pair’s 2016 low round zero.6827 earlier than taking goal at latest assist barely beneath zero.67.
AUD/USD Price Chart: Daily Time Frame (October 2018 – November 2019) (Chart 1)
On the opposite hand, zero.6895 to zero.6920 marks an space of appreciable confluence to the topside, threatening to maintain a lid on Aussie value good points. A break above the zone might open the door for a continuation larger within the days to return, a key facet of my AUD/USD analyst decide which is awaiting bullish affirmation.While AUD/USD and NZD/USD look to wrestle with the relative energy of the US Dollar, AUD/NZD is a pair which is more likely to obtain a extra direct injection of volatility. Further, the potential for outsized strikes is larger given the pair’s decrease liquidity.
With that being stated, Monday’s RBNZ fee choice has the chance to basically alter the pair’s panorama. With AUD/NZD having fun with a 2.65% climb within the year-to-date, any indication that the RBNZ will decrease charges additional might gasoline one other leg larger, whereas a pause in easing – as anticipated – might go away the pair eager for route alongside plummeting fee lower odds from the RBA.
AUD/NZD Price Chart: Daily Time Frame (August 2018 – November 2019) (Chart 2)
To that finish, AUD/NZD value good points in 2019 assert the pair is leaning larger presently, however issues stay. Notably, the pair has struggled to surmount the 1.084 degree just lately and will threaten to supply resistance previous to the Fibonacci degree round 1.089. As the market awaits the Reserve Bank of New Zealand’s choice, observe @PeterHanksFX on Twitter for additional updates and evaluation and verify again at DailyFX for commentary on the choice’s affect.
–Written by Peter Hanks, Junior Analyst for DailyFX.com
Contact and observe Peter on Twitter @PeterHanksFX