However, FX traders were soon pinned on the NZD, which was on the move early in Asian trade following another round of concerning data. This time it was the GDP print which came in well below estimates. Q1 GDP came in at just 0.2% q/q (versus 0.6% expected) while for y/y it came in at 2.6% (versus 3.1% expected).
Given the RBNZ recently cut rates and this was accompanied by dovish commentary, these readings will see expectations of further rate cuts ramp up. The RBNZ has shown a willingness to respond quickly to signs of economic shift time and time again and this will play on traders in the near term.
AUD/NZD extended gains in response, with the pair trading to its highest level since November last year. Just a couple of months ago the pair was trading near parity but has managed to nudge through $1.1200 today.
The next key level will be in the $1.1300 region, which is where highs from October and November last year kick in. This region capped any further gains and will be on traders’ radars in the near term.
I feel traders should consider buying the dips. However, the price action is in overbought territory at the moment with an RSI of 78 and as a result I wouldn’t suggest chasing the price action higher. Moves back into $1.1100 are likely to present good buying opportunities.