Get ready for a thrilling ride as we dive into the world of currency movements and their impact! The AUD/NZD pair is on a tear, breaking through a 13-year high and setting sights on even loftier levels. But here's where it gets controversial...
The medium-term uptrend in AUD/NZD resumed this week, reaching a peak unseen since 2013. This rally, which began in 2025, is a direct result of the widening policy gap between the Reserve Bank of Australia (RBA) and the Reserve Bank of New Zealand (RBNZ).
Initially, the RBNZ's aggressive rate cuts, pushing the OCR down to 2.25%, were the primary driver, weakening the Kiwi across the board. However, the momentum shifted when the RBA reversed its course and resumed tightening, raising the cash rate to 3.85%.
The latest boost came from RBNZ's decision to hold its policy this week, disappointing markets that had hoped for a more hawkish signal. Realistically, the RBNZ is expected to deliver, at most, one hike by the end of the year, with the OCR gradually moving towards the estimated neutral rate of 3.00% by late 2027. This contrasts sharply with Australia's more immediate tightening bias.
Today's robust Australian jobs data further strengthens the narrative of divergence. The RBA remains on course for another hike in May, and if inflation persists and labor conditions don't ease, further tightening beyond May cannot be ruled out.
Technically speaking, AUD/NZD is now targeting the 61.8% projection of 1.0795 to 1.1634 from 1.1412 at 1.1931. The outlook will remain bullish as long as the support at 1.1634 (previously resistance) holds.
The momentum could carry the pair beyond the 1.20 handle, but the upside may start to wane as positioning becomes stretched. The broader medium-term hurdle sits at the 100% projection of 0.9992 (2020 low) to 1.1489 (2022 high) from 1.0649 (2025 low) at 1.2146.
Even with another RBA hike, decisively breaking through the 1.2146 barrier would require a significant shift in central bank outlooks, which seems unlikely at this point. On the other hand, a topping formation between 1.2000 and 1.2146 is a distinct possibility, especially if the RBNZ's tightening timeline accelerates unexpectedly or if Australian data takes a turn for the worse.
So, what do you think? Will the AUD/NZD pair continue its upward trajectory, or is a reversal on the cards? Share your thoughts and predictions in the comments below!
