KEY PHRASES
- Ahead of crucial employment statistics, the AUD/USD has remained below 0.6340.
- Although the NZD/USD has stopped its current slide, any gains may be constrained by overhead trendline resistance.
- Intensifying concerns over policy divergence cause AUD/NZD to reverse course.
Recent declines in these currency pairs; AUD/USD and NZD/USD versus the US Dollar have been halted as risk appetite has rebounded.
Although both crosses remain under pressure, fresh bids into risk have pushed the pairings off their yearly lows. Despite high levels of uncertainty, the risk environment has been relatively calm recently since the US economic calendar is relatively empty.
The markets are currently anticipating a busy schedule of upcoming central bank meetings, with the FOMC policy meeting in early November drawing the most attention.
These tips will guide you on your trading journey.
AUD/USD
All of 2022 has been a difficult one for AUD/USD traders as “King Dollar” has effectively ruled over global capital markets. Now that the Reserve Bank of Australia (RBA) has decided to slow the pace of rate hikes, all eyes will be on employment data.
Australia’s Reserve Bank of Australia (RBA) is paying close attention to the labor market in order to prevent a “wage-price” spiral caused by the country’s low unemployment rate.
The RBA predicts a quarterly unemployment rate of 3.4%, down from the current rate of 3.5%. When the labor market weakens, investors may speculate that the RBA would cut its terminal rate even further, which would lead to a decline in the Australian dollar.
NZD/USD
The New Zealand dollar has had significant difficulty against the US dollar, but the tide may be turning. If New Zealand’s consumer price index (CPI) shows an unexpected improvement this week, the market may reevaluate the likelihood of a rate hike at the Reserve Bank of New Zealand’s (RBNZ) upcoming meeting in November.
While 50 bps is where the conversation is at the moment, the possibility of 75 bps gaining traction is there after it was brought up at the last policy meeting.
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So, with the FOMC and RBNZ still to come, the NZD/USD could keep rising for the time being. If the NZD/USD is going to make a move to the upside, it must first break above the trendline resistance that starts at the high set on October 5.
The 0.5545 area may come back into play as support if the pair keeps making lower swing-lows.
As a result of the unusual sell-off that occurred after last week’s CPI and PPI prints, investors should be wary of USD price action. A sharp rebound from these lows could be in store for high-beta FX if the market has priced in “peak” USD strength.
AUD/NZD
After failing to break the 1.1500 barrier in late September, the AUD/NZD has made a significant reversal. The RBA changed course after surprising markets with a 25 bps rate hike at its most recent meeting.
The focus in the AUD/NZD cross has shifted to policy divergences as the RBNZ appears determined to go on with aggressive rate hikes.
The AUD/NZD cross has dropped out of the channel that has contained its price for all of 2022 due to the pair’s strong decline. With traders reevaluating a less aggressive RBA, the Kiwi may continue to prosper despite the increased chances of a “hard landing” in New Zealand. If we continue on this path, we might see a retest of the crucial 1.1000 psychological level very soon.
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