AUD/NZD Stumbles Ahead of Aussie Data Dump
AUD/NZD continues to retreat from its five-year high, as traders brace for today’s Australian Retail Sales data and the RBA interest rate decision tomorrow.
The Retail Sales number for August is expected to show spending increased by 1.3%, the same as in July. Whereas, analysts forecast the Reserve Bank of Australia (RBA) will lift the Official Cash Rate (OCR) by 50 basis-points to 2.35%.
If the RBA deliver the expected rate hike, it will mark the fifth consecutive rise. However, the RBA is behind the RBNZ, which has raised rates seven times in a row, lifting the OCR to 3.00%.
Despite rate hikes being an effective tool to quell inflation, the RBA faces calls to slow the pace of tightening.
The RBA should press pause on interest rates at least until the October budget and put pressure on the Government to provide significant genuine immediate cost of living relief,Green Party Senator Nick Mckim
However, economist Chris Richardson is of the opinion, that the RBA has no alternatives: “The Reserve Bank is only going to stop when it hurts,” said Richardson, adding, “Hurts enough that we spend less than we are spending at the moment.”
The dilemma is not isolated to the RBA. Global central banks are walking a tightrope between rampant inflation and sluggish economic growth. Failure to tighten monetary policy let’s inflation run free. On the other hand, raising borrowing costs exacerbates the cost of living crisis. For now however, inflation is the greater evil. With this in mind, a 50 bp hike is almost assured.
Aussie Dollar to Kiwi Dollar Forecast
The daily chart shows AUD/NZD has fallen back into it’s sideways trading channel. As result, the trend line forming top of the band at 1.1920 is the first technical resistance.
As long as the rate remains below the trend, a return to the 50-Day moving Average (DMA) at 1.1083 (green) is likely. Below that, the 100-DMA at 1.1045 (blue) and the rising trend at 1.1009 offer additional support.
For now, the outlook is neutral. However, a break above the trend resistance is bullish, targeting the August high of 1.2546. By contrast, a close below the trend support at 1.1009 is bearish. Here, the 200-DMA at 1.0864 (red) is a logical target.
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