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AUD/NZD Forecast as it Forms a Head and Shoulders Pattern

The AUD/NZD pair pulled back this week after the extremely hawkish interest rate decision by the Reserve Bank of New Zealand (RBNZ). The AUD to NZD exchange rate is trading at 1.100, which is slightly below the year-to-date low of 1.1170. 

RBNZ interest rate decision

The main catalyst for the AUDNZD price this week was the latest interest rate decision by the RBNZ. The bank decided to hike interest rates by 0.50% as most analysts were expecting. The officials then warned that more rate hikes were possible in the next meetings. The bank is battling to fight inflation, which has risen faster than wages.

The pair is also reacting to the latest Australian jobs data. The numbers revealed that the country added thousands of jobs in June while the unemployment rate plummeted to 3.9%. This was the lowest level in years and is a positive sign that Australia will see a higher wage growth as the economy recovers.

The most recent catalyst for the AUD/NZD pair was the relatively weak Chinese economic numbers. The data showed that the economy expanded by 0.4% on a QoQ basis. This increase was worse than what analysts were expecting. 

Meanwhile, the Australian dollar has declined because of the falling commodity prices. Most commodities, include coal, iron ore, and copper pulled back slightly this week as demand faded. Aussie is often seen as a proxy to commodity prices.

AUD/NZD forecast

The daily chart shows that the AUD/USD pair was in a bullish momentum as the price of commodities rose. It rose to a high of 1.1170 in June. As it rose, it managed to move above the important resistance level at 1.0954, which was the highest point on March 26th. It is now slightly above this support level and has formed a small head and shoulders pattern.

The pair has also crossed the 25-day and 50-day moving averages. Therefore, there is a likelihood that it will soon have a bearish breakout as sellers target the key support at 1.0900. A move above the resistance at 1.1070 will invalidate the bearish view.