AUD/NZD Buyers Take Charge as Key Resistance Falls

Market Overview

On Thursday, both the Australian and New Zealand dollars continued their decline against the US dollar, despite gains in commodity prices. This drop is largely attributed to traders focusing on rising US Treasury yields and expectations that the Federal Reserve might delay cutting rates in December. However, the New Zealand dollar came under greater pressure compared to the Australian dollar, as the RBNZ is expected to implement an aggressive rate cut next week due to a weaker-than-expected economic outlook. Consequently, the Australian dollar gained strength against the New Zealand dollar, benefitting from its relatively more stable position.

Technical Analysis

On the daily chart, AUD/NZD has started to break out of a month-long consolidation range, shaped as a rectangular pattern. Buyers are currently challenging the upper boundary of this consolidation range, signalling a potential resumption of the broader bullish trend. The key level at 1.10895 serves as a crucial threshold for confirming a breakout. If the price manages to breach this level convincingly, the pair is set to target the first resistance at 1.11149. Sustained bullish momentum would then set sights on further price objectives at 1.11472 and ultimately 1.11828.

Should the bulls fail to maintain the push through this resistance, a continuation of the range-bound behaviour would likely follow, directing the pair towards immediate support at 1.10539 and the lower boundary of the rectangle pattern at 1.09962. The range’s floor would then come into play, serving as a key support and a potential buying opportunity if the broader bullish trend remains intact.

Oscillators Confirmation

Momentum oscillators confirm the bullish scenario. The Relative Strength Index (RSI) currently stands at a bullish level without entering the overbought territory, indicating sufficient room for further gains. Meanwhile, the MACD is also positive, with its histogram widening, signifying strengthening upward momentum. The moving averages further align with the bullish scenario—both the short-term and long-term moving averages are trending upwards, validating the buyers’ strength and underpinning the probability of sustained gains.

Alternative Scenario

In the event that price action fails to break above the 1.10895 level, the bullish outlook will come under question. A failure to hold above resistance could lead to a retracement towards support at 1.10539. Should downward pressure intensify, the key level at 1.09962—the bottom of the rectangular consolidation pattern—would be the next target. A sustained move below this support might indicate a shift towards a broader bearish trend, challenging the outlook of a continuation higher.

Key Support and Resistance Levels

Resistance Levels:

• 1.11828: Upper target level if the uptrend accelerates.
• 1.11472: Second upside objective with continued momentum.
• 1.11149: Immediate resistance, the first target post-breakout.
• 1.10895: Key breakout level; confirmation of bullish bias if surpassed.

Support Levels:

• 1.10539: Immediate downside support if bulls fail to break higher.
• 1.09962: Key level marking the bottom of the range; critical for maintaining the bullish structure.

Key Events to Watch

Next week, all eyes will be on the RBNZ meeting, where expectations are mounting for a potential rate cut, with some even predicting a bold 75-basis-point reduction. Such expectations have gained traction following a Treasury warning that the government’s anticipated economic recovery could be delayed. This dovish sentiment has bolstered the probability of a more aggressive rate cut, weighing on the New Zealand dollar. Investors should monitor these developments closely, as any deviation from expectations could bring considerable volatility to the AUD/NZD pair.

Conclusion

The AUD/NZD pair has shifted into a bullish stance, breaking above key levels after weeks of consolidation. Sustained moves above 1.10895 would confirm the breakout and pave the way for higher resistance levels. All eyes are on the upcoming RBNZ decision, which could either support or challenge this newly regained bullish momentum.