empty
03.11.2021 06:26 PM
AUD/NZD. Neighborhood Confrontation: New Zealand dollar starts and wins

It is risky to trade dollar pairs today. At the end of the US trading session, the Fed will announce its "verdict," which will determine the future fate of the US currency – at least in the medium term. Most experts are confident that Federal Reserve Chair Jerome Powell will finally announce the start of tapering a large-scale quantitative easing program. This is a long-awaited, but predictable event. But the future prospects of monetary policy are very vague.

Some representatives of the Fed are lobbying for the idea of raising the interest rate, pointing to a jump in inflation. However, not all members of the committee share such zeal.

Representatives of the "dovish" wing of the Fed (including Jerome Powell) continue to insist that the inflation boom is a temporary phenomenon. And, therefore, it is not worth rushing to tighten the parameters of monetary policy. In which direction the pendulum will swing according to the results of the November meeting is an open question. In my opinion, the American regulator will disappoint dollar bulls, but the option of a "hawkish surprise" cannot be ruled out.

This image is no longer relevant

Therefore, today the risks of false price movements are especially high, and especially in the short period of time between the publication of the Fed's accompanying statement and Powell's speech at a press conference. During periods of such emotional volatility, it is best to stay out of the market: traders will not immediately crystallize their general opinion on the outcome of the November meeting, especially if the Federal Reserve voices contradictory and ambiguous signals.

Thus, today we can take a closer look at the main cross-pairs, among which the AUD/NZD pair should be singled out. The Australian dollar is actively losing ground against its New Zealand namesake. Corrective pullbacks are of a short-term nature, and the "downward wave" is gradually increasing. For example, over the past three trading days, the pair has been steadily diving downwards, reflecting increased demand for the New Zealand dollar. Today's released data only increased the pressure on the cross: data on the growth of the labor market in New Zealand came out in the "green zone," demonstrating the stress resistance of the economy of the island state.

The unemployment rate in New Zealand in the third quarter of this year fell to 3.4% - this is the best result in the last 13 years. Most experts expected to see this indicator at 3.9%. The number of employed increased immediately by 2% (on a quarterly basis), with a growth forecast of up to 0.4%. In annual terms, the component also came out in the "green zone," jumping to 4.2% (with a growth forecast to 2.7%). The share of the economically active population also increased to 71.2% (the previous value was 70.5%).

Here it is necessary to recall the dynamics of New Zealand inflation, which was published in mid-October. The consumer price index in the third quarter of this year jumped to 2.2% (QoQ). The indicator has updated a 10-year record: the last time the CPI was at a similar height (in quarterly terms) was in early 2011. On an annualized basis, the index also came out in the "green zone," at 4.9%. Both components of the release have been showing upward dynamics for several consecutive quarters, reflecting an increase in price pressure.

All this suggests that the Reserve Bank of New Zealand will maintain a "hawkish course." In early October, the RBNZ raised the interest rate by 25 basis points, that is, to 0.5%. Taking into account the rhetoric of the central bank representatives, as well as the dynamics of key macroeconomic reports, it can be assumed that at the last meeting of this year (November 24), the RBNZ will hold another round of rate hikes - up to 0.75%.

The head of the New Zealand central bank also did not rule out such a scenario, however, without specifying the time frame. According to him, the central bank may tighten monetary policy again, "if the necessary conditions for this remain in the country." It should also be noted here that in New Zealand, 75% of residents have already received two doses of the coronavirus vaccine. This suggests that quarantine restrictions will be relaxed again in the near future, and the probability of a new lockdown is reduced to almost zero.

This image is no longer relevant

The Australian dollar cannot boast of the RBA's hawkish attitude. On the contrary, following the results of the last meeting, the head of the central bank, Philip Lowe, voiced a very "dovish" rhetoric, despite the general optimistic mood of the regulator. He categorically ruled out the option of tightening monetary policy parameters within the next year. At the same time, Lowe noted that the hawkish expectations of the market "are extremely unrealistic" (it was a question of a possible rate hike next year). He also said that optimistic estimates regarding the recovery processes "do not indicate that the rate will definitely be raised before 2024." According to him, there is a "high degree of uncertainty" in this issue, so it is quite likely that the rate will remain at the current level until the designated border date.

Such a fundamental background suggests that the New Zealand dollar, together with the Aussie, will continue to be in high demand. The AUD/NZD pair has not exhausted its downside potential, so sales are still a priority.

Technically, the pair on the D1 timeframe is between the middle and upper lines of the Bollinger Bands indicator, in the Kumo cloud, but below the Tenkan-sen Kijun-sen lines. The main support level is at 1.0350 - at this price point, the lower line of the Bollinger Bands indicator coincides with the lower border of the Kumo cloud on the same timeframe. This target is the target of the downside movement in the medium term.

Irina Manzenko,
Analytical expert of InstaForex
© 2007-2025
Summary
Urgency
Analytic
Irina Manzenko
Start trade
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

XAU/USD. Analysis and Forecast. Gold is supported by moderate USD weakness and trade-related uncertainty

Today, gold is trading higher, remaining within a sideways trend. Late Thursday, Federal Reserve official Christopher Waller stated that rising risks to the economy could justify a key rate

Irina Yanina 19:15 2025-07-18 UTC+2

AUD/USD. Analysis and Forecast

Today, the AUD/USD pair climbed above the key psychological level of 0.6500, attempting to confirm its recent positive momentum. The main driver behind the Aussie's rise is the weakening

Irina Yanina 13:49 2025-07-18 UTC+2

USD/CAD. Analysis and Forecast

Today, Friday, the USD/CAD pair is pulling back from a three-week high near 1.3775 recorded yesterday. At the moment, prices are trading slightly below the 1.3730 level, showing a modest

Irina Yanina 13:38 2025-07-18 UTC+2

The European Central Bank May Postpone Its Rate Cut Until December

While the euro attempts to stage a correction against the U.S. dollar, a survey of economists suggests that the European Central Bank may delay its final interest rate cut until

Jakub Novak 11:37 2025-07-18 UTC+2

Powell Responds to White House Criticism

Lately, Federal Reserve Chair Jerome Powell has faced increasing pressure, coming under fire from lawmakers, the White House, and U.S. President Donald Trump. In a letter sent on Thursday, Powell

Jakub Novak 11:26 2025-07-18 UTC+2

The U.S. Begins Regulating the Digital Currency Market (Potential for a Correction in Bitcoin and EUR/USD)

The U.S. House of Representatives has passed bills establishing the first federal framework for dollar-backed stablecoins and setting regulations for other digital currencies. The idea of regulating the cryptocurrency market

Pati Gani 09:28 2025-07-18 UTC+2

The Market Favors a Weak Dollar

What could be better for the S&P 500 than a Federal Reserve rate cut amid a still-strong economy? A series of positive labor market and retail sales data, combined with

Marek Petkovich 09:28 2025-07-18 UTC+2

What to Pay Attention to on July 18? A Breakdown of Fundamental Events for Beginners

Several macroeconomic reports are scheduled for release on Friday, but none of them are of major importance. The only noteworthy release is the University of Michigan Consumer Sentiment Index

Paolo Greco 06:13 2025-07-18 UTC+2

GBP/USD Overview – July 18: Is the Market Tired of the Dollar and Trump?

The GBP/USD currency pair once again leaned toward decline on Thursday. After the British pound strengthened on Wednesday evening following another report about Powell's dismissal, the dollar quickly recovered. However

Paolo Greco 03:56 2025-07-18 UTC+2

EUR/USD Overview – July 18: Trump Will Keep Trying to Fire Powell for Another Year

The EUR/USD currency pair continued its steady decline throughout Thursday. As a reminder, the forex market experienced an "explosion" on Wednesday evening. Donald Trump once again attempted to either fire

Paolo Greco 03:56 2025-07-18 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.