AUD/NZD eyes 1.0400, ahead of the RBNZ Monetary Policy Statement

• In the last week, most analysts expected a rate hike of 25 bps.
• Single covid-19 case in Auckland, New Zealand weighs on the NZD.
• NZD slides against all of the G7 currencies.

Later, in the day by 02:00 GMT, the Reserve Bank of New Zealand, also known as RBNZ, will unveil its Monetary Policy Statement. In the last week, the majority of the market priced in a 25 bps hike in the Overnight Cash Rate, while the most optimistic, the minority, were looking for a 50 bps hike.

However, conditions have changed. Yesterday, early in the Asian session, when the news of a case of covid in New Zealand hit the wires. The market’s reaction to this was to dump the New Zealand dollar against most of the G7 currencies. (Table 1)

Table 1

The reaction of the market could be attributed to the rapid spread of the Delta variant, and the slow vaccination rate in the country of barely 19% of the population. Now the market is reassessing if the RBNZ is going to hold or if they stick with the 25 bps hike.

AUD/NZD Technical outlook

The price trades at 1.0440. The moving averages remain well above the spot price with the 50-day moving average at 1.0626, while the 200 and the 100-DMA’’s hover around the 1.0685/95 range. The pair remains in a downtrend and flattish awaiting RBNZ’s decision.

RSI is at 38.69 rising, while the Average True Range (ATR) is 58 pips and heading lower.

Resistance: 1.0540 (August 16 high), 1.0607 (July 28 high), 0.0626.

Support: 1.0450, 1.0418 (2021 low), 1.0350.