AUD/NZD Bulls Push for Short-Term Recovery Amid Mixed Fundamentals
Market Overview
The Australian dollar (AUD) is showing signs of a short-term recovery against the New Zealand dollar (NZD) following the release of local economic data. New Zealand’s electronic card retail sales rose by 2.0% in December, marking the largest monthly increase since early 2022. Despite this, the AUD has managed to gain strength against New Zealand Dollar in the near term, driven partly by a rebound in the U.S. dollar, which was initially weakened by President Trump’s emergency declaration over southern border concerns. These dynamics have created a backdrop for a potential upward correction in the AUD/NZD pair, even as broader market trends remain uncertain.
Technical Analysis
The AUD/NZD pair remains in a short-term downtrend, as indicated on the 30-minute chart. However, buyers have regained control, pushing the price above the key level of 1.10594. This break signals the start of a potential corrective phase. If the bullish momentum continues, the first resistance lies at 1.10636, marking a critical level for short-term sentiment. A successful breach of this level could pave the way for further gains, with subsequent targets at 1.10690 and 1.10750.
Momentum indicators support this recovery scenario. The RSI is trending higher, reflecting increased buying activity without entering overbought territory, while the MACD shows a bullish crossover, confirming strengthening momentum. However, moving averages suggest a mixed outlook, with longer-term averages still pointing downward, underscoring the pair’s vulnerability to renewed selling pressure.
On the downside, sellers would need to push the pair below the critical support at 1.10438 to regain control. A break below this level would invalidate the corrective move and potentially extend the existing downtrend, targeting lower support levels.
Oscillators and Risk Warnings
- RSI: Bullish, reflecting increased buying activity but not yet overbought.
- MACD: Bullish, signaling improving momentum.
- Moving Averages: Mixed, with long-term trends still favoring the downside.
Key Technical Levels
- Resistance Levels: 1.10636, 1.10690, 1.10750
- Support Levels: 1.10594, 1.10438
Fundamental Factors
Monetary policy expectations for both Australia and New Zealand are heavily influencing market sentiment. The Reserve Bank of New Zealand (RBNZ) is scheduled to meet on February 19, with market participants assigning an 80% probability of a rate cut from 4.25% to 3.75%. Furthermore, forecasts suggest rates could drop to a range of 3.0%-3.25% by year-end. Meanwhile, the Reserve Bank of Australia (RBA) is expected to reduce its cash rate by 25 basis points at its February 18 meeting, reflecting market speculation of easing policy to support economic activity.
These diverging policy expectations, coupled with fluctuating global risk sentiment, are likely to drive further volatility in the AUD/NZD pair. Traders will also monitor broader economic developments and central bank communications for additional clues on the future trajectory of interest rates in both countries.
Conclusion
The AUD/NZD pair is attempting a corrective recovery, with immediate resistance levels offering a litmus test for the strength of bullish momentum. While technical indicators favor a short-term upside, sellers remain poised to reclaim control if key support levels are breached.
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