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AUD/NZD – Heading for Fresh Lows?
Over the next 24 hours all attention in the currency market will turn to the Asia Pacific region as the two commonwealth economies take center stage. On Wednesday New Zealand may become the first developed economy to raise rates in more than 3 years. The RBNZ has been promising to hike rates for nearly 6 months and tomorrow the moment of truth will arrive as the central bank is expected to hike rates by 25bp. However, the more important point will be whether the RBNZ then confirms that it will commence the full tightening cycle rather than just doing a one-off policy move. If RBNZ does hint that rates will increase steadily then the kiwi is likely to push higher and test the yearly highs a speculative capital moves into the unit. Meanwhile later in Australia the market will get a glimpse of the AU labor data which is expected to rebound from last month’s weak showing. However, if the Aussie number disappoint and the RBNZ remains hawkish then the AUD/NZD could be headed for fresh yearly lows.
The key level of support in AUD/NZD is the 1.0500 level and if the pair breaks below that figure it could target 1.0300 as the next level for the shorts. On the other hand a break abouve 1.0700 would suggest that a bottom is in place and the pair could head higher to test the 1.0900 figure.