The AUD/NZD pair has recently experienced a significant decline, bringing it close to the support level of 1.0800. This is due to the Reserve Bank of Australia (RBA) deciding to maintain the current interest rate of 4.10%, rather than increasing it by 25 basis points (bps) to 4.35%, which was expected by some investors.
The RBA’s decision may have been influenced by the recent decrease in the monthly Consumer Price Index (CPI), which eased to 5.6% in May from the previous rate of 6.8%. This decline was mainly due to lower gasoline prices, which helped to reduce inflationary pressure in Australia. Consequently, RBA Governor Philip Lowe has opted for a more relaxed monetary policy.
Despite this, the labor market in Australia remains strong, with a drop in the Unemployment Rate to 3.6% in May compared to the previous figure of 3.7%. This indicates positive demand for jobs in the country.
Price pressures in the Australian region are currently below the desired rate of 2%, and a steady interest rate policy could provide RBA policymakers with more time to assess the effectiveness of interest rate hikes in achieving price stability. Investors need to understand that further rate hikes may still occur, as financial markets predict that the RBA’s Official Cash Rate (OCR) may peak at around 4.6%.
As for the New Zealand Dollar, inflation shows no signs of easing and the economic outlook has greatly declined. The Reserve Bank of New Zealand (RBNZ) has already increased its OCR to 5.50%, with more rate hikes expected in the future.
AUD/NZD Short (Sell)
Enter At: 1.079616
T.P_1: 1.077130
T.P_2: 1.073737
T.P_3: 1.070083
T.P_4: 1.066950
T.P_5: 1.063557
S.L: 1.087048
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