Initially, the RBNZ had a tightening bias, which was greeted by aggressive buying of the NZD. However, this all unwound at some stage as inflation came under pressure from falling oil prices and commodity currencies faced some selling.
While most market watchers look at the NZD against the greenback, AUD/NZD has been a big talking point recently with some analysts going as far as saying the pair is headed to parity in coming months.
AUD/NZD topped out just short of $1.0800 in January and has since been descending quite rapidly. Australia commenced easing this month and expectations are rife that we’ll see further easing in coming months.
The pair broke below an uptrend support line at about $1.0550 this week and has come under pressure since then. This subsequently saw it drop below $1.0500 and left the pair vulnerable to a move down to January lows at $1.0355.
On the calendar this week we have Australian jobs numbers, and RBA Governor Glen Stevens testifies in front of the House of Representatives on Friday. These two events could cause some volatility for the pair. I feel traders will consider selling rallies back into the $1.0550 region.