JUL 16, 2021
- Strong New Zealand inflation data driven by rising home prices
- Australian jobs growth slowed
- Potential downside in AUD/NZD
Chart 1: AUD/NZD D1 chart
Statistics New Zealand reported a rise in inflation by 1.3% during the second quarter of 2021, the highest quarterly figure in several years. Annual inflation is now standing at a multi-year high of 3.3%. The main driver for this was higher new home prices. The strong rise in inflation will more or less lead to speculations that the Reserve Bank of New Zealand (RBNZ) may be carrying out its first post-pandemic interest rate hike sooner than expected. Furthermore, the RBNZ has just recently halted its Large Scale Asset Purchase (LSAP) programme, a huge move that surprised many as they were expecting the central bank to taper quantitative easing instead of putting a stop to it.
Although the Australian Bureau of Statistics reported an increase in jobs while seeing a decline in unemployment rate in June, the number of jobs added was the lowest since February this year, indicating a slowdown in jobs growth. As a result, the RBNZ’s hawkish move together with the high rise in New Zealand inflation sent AUD/NZD down from the 1.07 handle to the 1.06 handle.
At the moment, AUD/NZD is testing to break below the 1.06 handle which has proven to be quite a strong level this year thus far. Our technical indicators are showing a strong sign of downward momentum. Breaching below the handle will present selling opportunities of AUD/NZD.
Trade Setup for AUD/NZD (D1)
Sell Stop at 1.05300
Upcoming major news that may impact price movement of AUD/NZD
20 July – Reserve Bank of Australia monetary policy meeting minutes release at 0930 (GMT+8)
23 July – Australian Flash PMI data release at 0700 (GMT+8)
28 July – Australian CPI q/q data release at 0930 (GMT+8)
29 July – New Zealand ANZ Business Confidence data releease at 0900 (GMT+8)
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