At the beginning of May 2015 AUDNZD came within pips of parity and, unfortunately for my parity call, it hasn't looked back since. Within a matter of months it agggresvely hit the 1.13 target projected from the bullish wedge at the multi-year lows where price action went into a multi-month correction. We are yet to break above the 1.1480 highs to confirm a resumption of the anticipated primary trend as the weekly charts now range between 1.1334 resistance and 1.097 support.
Looking ahead if we a see a deeper retracement over the coming weeks a potential bullish trendline from the near-parity lows could provide support. Before we reach the trendline there is also potential support from the 50 week MA and 50% retracement (1.0947-70 zones).
The 2016 highs are currently capped by the 200 week MA, an average which has not been tested a single time since breaking beneath it in November 2011. This is an important point because it is rare to see such a long-term average break upon first attempt, so I suspect AUDNZD is lkely to remain contained between 1.097-1.1330 until a stronger diverging theme occurs between RBA and RBNZ.
Australia's Service PMI disappointed today by contracting, failing to live up to the manufacturing read last week. This could be another drag on the economy and yet another reason why we could expect growth to remain blew trend for longer than RBA anticipated. Put this alongside the worrying capex data then it becomes a little more difficult to get too excited about recent job strength. At the same time we now see NZ business confidence falling with a grim outlook over the next 6-12 months despite recent rate cut (and likelihood of more) further down the track.
If a diverging theme is to occur over the coming months then I suspect to see a more dovish RBNZ before we see a more hawkish RBA (assuming they get that far). Of course we also run the risk of just ending up with two more doves on an easing cycle which will add to the complexity of the price action, and making any significant breakout in either direction less likely.
As outlined yesterday I expect RBA to remain reserved and not jawbone the Aussie Dollar today. This leaves AUD crosses vulnerable to an upside move but we should also allow for either an obligatory spike around the release or profit taking from AUD bulls prior, to see Aussie lower initially.