Key points:
- Australian dollar edges near key resistance levels, influenced by risk sentiment.
- New Zealand dollar holds firm ahead of crucial interest rate decision.
The Australian dollar nudged higher on Tuesday, brushing up against resistance as a rally in Japanese stocks bolstered risk sentiment across the market.
The AUDUSD pair edged up to $0.6592, closing in on the 200-day moving average at $0.6598. With resistance levels in sight, the next targets for the Aussie are $0.6625 and $0.6700, while support is found at $0.6550.
Aussie dollar nears key resistance levels with potential for further gains
See: Aussie trading at 0.65916 as seen on the VT Markets app.
The upward movement in the Australian dollar reflects a cautiously optimistic market mood, buoyed by gains in Asian equities. However, traders should watch these resistance levels closely, as breaking through could pave the way for further gains.
If the Aussie breaches the $0.6598 mark, we might see momentum carry it towards $0.6625, with $0.6700 as a subsequent target. On the downside, a drop below $0.6550 could trigger a pullback, potentially inviting sellers back into the market.
On the other side of the Tasman, the New Zealand dollar also held steady, trading at $0.6025, after testing resistance around $0.6035. A successful breach of this level could open the path to $0.6097, while support rests at $0.5995. The kiwi dollar’s movement is closely tied to the upcoming interest rate decision by the Reserve Bank of New Zealand (RBNZ), set for Wednesday.
You might be interested: Aussie and Kiwi hold steady as bond rally fuels rate cut hopes
Rate hold by RBNZ could spark sharp kiwi rally amid skewed market expectations
The market is pricing in a 69% chance of a 25-basis-point rate cut, with expectations of up to 85 basis points of easing by the end of the year. This skewed positioning suggests that if the RBNZ decides to hold rates steady, the kiwi could see a boost.
Australian economic data released on Tuesday showed that wages rose by 0.8% in the second quarter, slightly below the forecast of 0.9% and marking the slowest increase in a year.
Meanwhile, the National Australia Bank’s (NAB) latest survey indicated a pickup in business activity, with price pressures gradually easing. A consumer survey revealed that tax cuts have slightly improved the public’s outlook, but concerns remain over the Reserve Bank of Australia’s (RBA) hawkish stance.
Wage growth slows amid rising business activity and RBA concern
The RBA recently expressed relief at the easing wage pressures but remains cautious. The central bank’s reluctance to cut rates soon is reflected in the market’s pricing, which shows a 50% chance of a cut in November and a stronger expectation for a move in December.
As the Aussie tests resistance levels and the kiwi awaits the RBNZ’s decision, traders should stay alert to these key developments. The outcome of the RBNZ meeting could set the tone for the kiwi’s trajectory, while the Australian dollar’s performance will depend on its ability to break through current resistance levels.
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