AUD/NZD Extends Four-Day Rally as RBA Hawkishness Supports Aussie

Traders' Opinions

Summary:

AUD/NZD rebounds from 1.2065 to above 1.2100, extending its advance for a fourth consecutive session. Hawkish RBA expectations continue to support the Aussie, although expectations for further RBNZ tightening are limiting the upside ahead of Australian GDP and the RBNZ decision.

BUY AUDNZD

EXP

TRADING

1.21000

Entry Price

1.22600

1.20000

1.21071 -0.00023 -0.02%

0.0

Pips

Flat

1.20000

Exit Price

1.21000

Entry Price

1.22600

AUD/NZD is maintaining its upward momentum at the start of the week, recovering from an intraday dip toward 1.2065 to climb above 1.2100 and reach its highest level since July 9. The cross has now advanced for four consecutive sessions, although buyers are showing some hesitation ahead of a busy week for Australian and New Zealand monetary policy expectations.

The Australian Dollar continues to benefit from a relatively hawkish Reserve Bank of Australia outlook. Governor Michele Bullock has made it clear that rate cuts are not currently under consideration, while leaving the door open to additional tightening if inflation does not moderate as expected.

That position was reinforced by the minutes from the RBA's August meeting, helping maintain expectations that Australian interest rates could remain restrictive or potentially move higher.

China's latest economic figures have provided another layer of support for the Aussie. Manufacturing PMI improved to 49.8 in August from 49.2, slightly exceeding expectations of 49.7. Non-Manufacturing PMI remained unchanged at 49.0.

The improvement is encouraging, but both readings remain below the 50 threshold separating expansion from contraction. That limits the strength of the China-related boost to the Australian Dollar and may partly explain why AUD/NZD has struggled to accelerate significantly after moving above 1.2100.

The New Zealand Dollar also has monetary-policy support of its own. The NZIER Monetary Policy Shadow Board indicated that the RBNZ should raise the Official Cash Rate by 25 basis points in September, while traders are also looking for signs that another increase could follow before the end of the year.

Those expectations could make it increasingly difficult for AUD/NZD to extend its rally without additional support from the Australian side.

That puts Wednesday's Australian second-quarter GDP figures firmly in focus. The release will be followed by the RBNZ's monetary-policy decision, creating two potentially significant catalysts for a cross already trading at its strongest level in several weeks.

For now, the Australian Dollar retains the advantage, with AUD/NZD's four-day advance showing that RBA tightening expectations continue to outweigh support coming from the New Zealand rate outlook. However, with both central banks maintaining relatively hawkish policy expectations, the move above 1.2100 may require another catalyst before the current one-week uptrend can accelerate further.

Technical Analysis

The AUD/NZD 4-hour chart is showing a strengthening bullish structure, with the pair recovering sharply from the late-August lows and pushing through an important resistance area around 1.2085–1.2100. Price is currently trading close to 1.2100, and the recent breakout suggests the broader consolidation may finally be resolving in favour of buyers.

For several weeks, AUD/NZD repeatedly struggled to sustain moves above the 1.2080–1.2100 region, while the lower boundary around 1.1930–1.1940 consistently attracted demand. The latest rally is different in that price has moved beyond the previous swing highs and is now attempting to establish the former ceiling as support.

A short-term pullback toward 1.2085–1.2090 would therefore fit comfortably within the bullish scenario. Holding this area on a retest would strengthen the breakout structure and provide buyers with a base for another push higher. The recent sequence of rising lows also supports the argument that momentum has shifted away from the broader range-bound conditions seen through July and much of August.

The immediate upside hurdle sits around 1.2120–1.2130, where the latest advance encountered some resistance. Clearing this level would confirm another higher high and leave considerably more room for AUD/NZD to extend its recovery.

The larger objective is located around 1.2260–1.2270, which represents the next major supply zone visible on the chart. A sustained breakout from the current consolidation could therefore develop into a significantly larger bullish move if buyers maintain control above 1.2080.

The bullish scenario would begin to weaken if price falls decisively back below the breakout area. Such a move would suggest the push above 1.2100 was unsuccessful and could reopen the door toward 1.2000, followed by the major 1.1930–1.1940 demand zone.

For now, however, the technical structure favours continuation. AUD/NZD has broken through a resistance area that repeatedly capped previous rallies, and a successful retest around 1.2085 could provide the foundation for an eventual advance toward 1.2260.

TRADE RECOMMENDATION

BUY AUD/NZD

ENTRY PRICE: 1.2100

STOP LOSS: 1.2000

TAKE PROFIT: 1.2260

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AUD/NZD Extends Four-Day Rally as RBA Hawkishness Supports Aussie

Technical Analysis

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