Key points:
The Australian and New Zealand dollars saw a lift on Thursday, as a rebound in global stock markets and the anticipation of a European Central Bank (ECB) rate cut helped stabilise risk sentiment.
The market widely expects the ECB to ease by 25 basis points, and the key question now is whether further cuts will be signaled for October or December.
See: The Aussie rebounded against the yen, trading at 95.184 on the VT Markets app.
Looking at the charts, we see the AUD/JPY pair having a strong recovery after dipping to 93.588, climbing back to 95.506 on renewed market optimism. The Australian dollar’s movement reflects a broader recovery in risk sentiment, and the pair’s rebound from its low aligns with the Australian dollar stabilising after touching the 200-day moving average against the U.S. dollar.
The MACD indicator on the chart shows a bullish crossover, suggesting continued upward momentum in the short term. The moving averages (5, 10, 30) reflect this upward trend as the pair moves back towards the 95.5 resistance level.
Traders will likely keep an eye on global risk sentiment, as the Australian dollar is often used as a proxy for risk assets.
Further gains could be seen if optimism continues, but resistance near the 95.5 mark could test the pair’s upward momentum. A potential pullback to the mid-94.00s is possible if market sentiment weakens.
A key factor influencing market sentiment was the slightly higher-than-expected reading of 0.28% for U.S. core consumer prices.
This tempered expectations of a major rate cut from the Federal Reserve in its upcoming meeting, prompting investors to reduce their bets on near-term easing by the Reserve Bank of Australia (RBA).
The probability of a rate cut in November has now dropped to just 27%, with December still being the more likely target at 68%, compared to over 90% just weeks ago.
In New Zealand, price data for August revealed a modest 0.2% rise in food prices, while petrol, airfare, and accommodation costs all fell. As a result, Westpac revised its inflation forecast for the September quarter down from 1.1% to 0.9%. Economists now expect annual inflation to drop below 3% for the first time since 2021.
With the Reserve Bank of New Zealand (RBNZ) meeting on October 9, expectations are for another 25-basis-point cut, with some market participants seeing a slim chance of a more aggressive half-point cut.
Both currencies are finding solid support as markets anticipate easing inflation and central bank responses. While the RBA and RBNZ remain cautious, traders are positioning for potential further gains in the Australian and New Zealand dollars, provided global sentiment holds steady and inflation continues to ease.
Start trading now — click here to create your live VT Markets account.
Official partners:
