Track market-moving stories before they get noisy

The Aussie enters this week with genuine hawkish backing after Australia’s Q2 GDP surprised sharply to the upside, pushing the market-implied probability of a September RBA hike from 48% to 57%, with a November move now more than fully priced. Governor Bullock’s board has already flagged upside inflation risks tied to Middle East-driven energy costs, and rising Australian bond yields, which touched their highest level since April 2011 this week, are only reinforcing that hawkish backdrop.

Across the Tasman, the RBNZ delivered exactly what all five major New Zealand bank economists expected on Wednesday: a 25bp hike to 2.75%, the second consecutive increase after July’s tightening move. Headline inflation remains elevated at 4.1%, though the central bank’s own projections signal a likely pause in October before potentially resuming in December, leaving markets pricing roughly a 30% chance of another hike this year.

The result: two central banks now both firmly in tightening mode, though the RBA’s path still carries more near-term uncertainty than the RBNZ’s, whose next move already looks broadly telegraphed through year-end.

Technical Analysis of AUD/NZD

As the AUD/NZD chart shows, the pair staged a sharp rally from the 1.19633 low, riding a steep ascending trendline that has powered the entire late-August advance. That rally has since run into resistance near the 1.22897 high, the 0 Fibonacci level, where price is now consolidating just above the 0.236 retracement near 1.22127, caught between a shorter-term descending trendline from this week’s peak and the broader medium-term descending trendline that has capped the pair since late June.

Bullish Scenario

Should buyers defend the 0.236 retracement and the ascending trendline while breaking above the short-term descending trendline, the path would open towards a retest of the 1.22897 high. A confirmed break above that level would mark a genuine shift in the broader multi-month structure.

Bearish Scenario

Conversely, a break below the 0.236 level and the steep ascending trendline would expose the intermediate 1.213–1.215 support zone, coinciding with the 0.5 Fibonacci retracement. A deeper slide below that zone would risk a fuller retracement of the late-August rally, back towards the 0.618–0.786 area near 1.203–1.209.

With price squeezed between a reclaimed short-term trendline, a defended ascending trendline, and the long-term descending trendline, AUD/NZD looks poised for a decisive move. Will the RBA’s hawkish momentum push the pair through resistance, or will the broader downtrend since June reassert control?

Trade over 50 forex markets 24 hours a day with FXOpen. Take advantage of low commissions, deep liquidity, and spreads from 0.0 pips (additional fees may apply). Open your FXOpen account now or learn more about trading forex with FXOpen.

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

FXOpenhttps://www.fxopen.com/

FXOpen is a global Forex and CFD Broker, founded in 2005 by a group of traders. With over 16 years of experience, the company has gained an excellent reputation a major brokerage that continues to expand rapidly. The broker offers a choice of platforms, including the popular MT4 and MT5 platforms, with a wide range of trading instruments with spreads from 0.0 pips: 600+ FX, index, share, commodity and cryptocurrency CFDs. FXOpen also provides its own PAMM technology, allowing clients to benefit from the strategies of experienced traders with a proven track record of successful trading and guarantees automatic distribution of profit and loss between the strategy provider and the strategy followers. CFDs are complex instruments and come with a high risk of losing your money. PAMM is only available in certain jurisdictions. Cryptocurrency CFDs are not available to Retail clients at FXOpen UK.

TL;DR: With markets already convinced the RBA is done hiking, tomorrow’s New Zealand employment report matters less for whether the RBNZ turns more hawkish and more for whether the labor market stays resilient enough to keep its tightening bias intact — a dynamic already pressuring AUD/NZD lower.

Why the Focus Has Shifted Across the Tasman Markets have already reached a broad consensus that the Reserve Bank of Australia has finished tightening for this year. The focus is now shifting across the Tasman, where the Reserve Bank of New Zealand still appears to have work left to do. That makes tomorrow’s second-quarter employment report less about whether the RBNZ will turn more hawkish, and more about whether the labor market is resilient enough to keep its existing tightening bias intact.

Inflation Already Made the Case for More Tightening The case for further tightening was largely established by inflation. New Zealand’s second-quarter CPI rose 4.1% y/y, exceeding the RBNZ’s 3.9% forecast and reminding policymakers that price pressures remain more persistent than expected. More importantly, non-tradable inflation held at an elevated 3.4%, indicating domestic inflation — not just higher fuel costs linked to the Middle East conflict — continues to pose a challenge.

Stronger business sentiment since then has only reinforced that picture, with July’s ANZ Business Confidence jumping to 56.1 from 36.6.

Why Tomorrow’s Data Doesn’t Need to Surprise Against that backdrop, tomorrow’s labor market data don’t need to surprise on the upside to support the policy outlook. Consensus forecasts call for:

Employment growth of 0.1% q/q. Unemployment edging up from 5.3% to 5.4%. The Labour Cost Index accelerating from 0.5% to 0.6% q/q. Those figures are broadly consistent with the RBNZ’s own projections, meaning an in-line report would leave the Bank’s economic assessment largely intact. Instead of weakening the tightening narrative, it would reinforce the view that policy still needs to move somewhat further into restrictive territory to contain domestic inflation and limit second-round effects from higher energy prices.

What Would Actually Move Markets The bigger market reaction would likely come from a stronger-than-expected report. Faster employment growth, firmer wage inflation, or a lower unemployment rate would strengthen the case for another hike as early as September, and increase expectations that the Official Cash Rate ultimately reaches the upper end of the 2.75%–3.00% range currently expected by many economists. Only a materially weaker labor market would cast meaningful doubt on that outlook, by suggesting higher borrowing costs are beginning to bite more sharply than anticipated.

Why This Matters for AUD/NZD Those shifting policy expectations have become important for AUD/NZD. Australia’s softer-than-expected second-quarter CPI has persuaded markets the RBA is likely to keep the cash rate unchanged at 4.35% through year-end, effectively ending a period in which Australian rate expectations consistently outpaced those in New Zealand. With the RBA sidelined, investors are now watching whether the RBNZ can narrow the policy differential through further tightening, providing fundamental support for the New Zealand Dollar against its Australian counterpart.

ActionForex’s Technical View on AUD/NZD The technical picture complements the macro story. AUD/NZD’s decline from 1.2283 continues to look like a correction of the five-wave advance from 1.0649. As long as 1.2119 resistance caps rebounds, the bias remains lower. The next downside objective remains the 38.2% retracement at 1.1658, which sits just above the previous fourth-wave consolidation around 1.1412–1.1634.

Against a backdrop of narrowing policy differentials, tomorrow’s New Zealand labor market report has the potential to provide the catalyst for the next leg lower in AUD/NZD.

Key Takeaways New Zealand’s Q2 CPI beat the RBNZ’s own forecast at 4.1% y/y, with sticky non-tradable inflation at 3.4% keeping the tightening bias intact. Consensus expects tomorrow’s employment data to come in broadly in line with RBNZ projections, meaning an in-line print alone would reinforce, not weaken, the hawkish case. A stronger-than-expected report would raise September hike odds and support an Official Cash Rate move toward the top of the 2.75%-3.00% range. Australia’s softer CPI has convinced markets the RBA is done hiking, shifting the AUD/NZD policy narrative fully toward the RBNZ’s next move. AUD/NZD’s decline from 1.2283 remains capped below 1.2119 resistance, with 1.1658 the next downside objective if the labor data supports further RBNZ tightening.

ActionForex

ActionForex.com was set up back in 2004 with the aim to provide insightful analysis to forex traders, serving the trading community for two decades. We started providing only a daily and a mid-day report, now known as Action Insights. Gradually, we added a lot more in-house contents to the site. Technical Outlook section was expanded to cover more pairs. In addition to that, Top Movers, Heat Map, Pivot Point Charts and Pivot Meters, Action Bias and Volatility Charts, are tools used by traders from all over the world.

Headline inflation beats, underlying pressures easing Tradables prices undershoot RBNZ's forecast September RBNZ hike likely, longer-term pricing looks excessive NZD/USD bulls retain technical advantage above support AUD/NZD breakdown keeps sellers firmly in control A beat, but with important caveats New Zealand consumer prices rose 1.5% in the June quarter, lifting the annual inflation rate to 4.1%. While that was above the 4.0% increase expected by economists, it fell just short of the Reserve Bank of New Zealand's 4.2% forecast released in May.

That suggests inflation remains uncomfortably high and is likely to keep the RBNZ on course to tighten policy further. However, the underlying details were more encouraging, with the broadest measure of core inflation easing further and domestic price pressures evolving broadly as the central bank had anticipated.

The composition of the report was arguably more important than the headline. While annual inflation accelerated, much of the increase reflected higher tradeable prices, which are influenced by developments offshore rather than domestic demand.

Source: FOREX.com, RBNZ, StatsNZ

Tradeable inflation accelerated to 4.9% over the year, driven largely by a 27.5% jump in petrol prices and a 71.0% surge in other vehicle fuels and lubricants. However, that was well below the RBNZ's 5.6% forecast, explaining why headline inflation also undershot the central bank's expectations.

By contrast, non-tradeable inflation, which is viewed as a better gauge of domestically generated price pressures, eased to 3.4% and matched the RBNZ's forecast. Electricity and local authority rates provided the largest upward pressure, while lower real estate services prices helped offset some of the increase.

The broadest measure of underlying inflation, CPI excluding the food group, household energy subgroup and vehicle fuels, also continued to ease, slipping to 2.5% from 2.6%. While it remains in the upper half of the RBNZ's 1–3% target band, the continued moderation suggests underlying inflation pressures are still moving in the right direction rather than becoming more entrenched.

Traders should now watch the release of the RBNZ's Sectoral Factor Model at 3pm Wellington time. The measure, which strips out temporary price movements to provide another gauge of underlying inflation, printed at 2.7% in the March quarter and could influence moves in New Zealand financial markets should it deliver a meaningful surprise.

What it means for the RBNZ

Source: Bloomberg

When all said and done, today's report is unlikely to materially alter the RBNZ's near-term thinking. Inflation remains above target and the central bank has already adopted an explicit tightening bias. Another 25 basis point increase in September still looks very likely and is close to fully priced, with the risk of a second move by October also deemed slightly more likely than not ahead of November's general election.

Further out, though, market pricing looks far too punchy. Overnight index swaps continue to imply close to five additional quarter-point increases by May next year, taking the OCR to around 3.75%.

That profile looks too aggressive given the broader economic backdrop. While inflation remains high, underlying price pressures continue to ease and there is still ample slack in the labour market, with little evidence that wage growth is accelerating in a way that would warrant taking policy deep into restrictive territory.

The next major test for that view will come on 13 August, when the RBNZ releases its latest Survey of Expectations. Of particular interest will be the two-year inflation expectations measure, which climbed to 2.53% in May from 2.37% previously.

Another meaningful acceleration would strengthen the case for additional tightening, potentially even a 50 basis point move, which can't be ruled out given some of the hawkish rhetoric from external members of the Monetary Policy Committee. But if inflation expectations fail to accelerate again, it would cast doubt on the degree of tightening currently priced into the OIS curve.

At face value, today's report may be interpreted as hawkish given headline inflation exceeded economists' forecasts. I'm not convinced that's the right read. The underlying detail tells a different story, particularly with the broadest measure of core inflation continuing to ease and tradables inflation coming in well below the RBNZ's own forecast.

That's just one of several factors to consider when assessing directional risk for the Kiwi dollar. While domestic rates remain an important driver, recent price action has also become increasingly sensitive to broader risk appetite and changes in US interest rate expectations. Starting with NZD/USD, here's how the technical picture stacks up.

The battleground for Kiwi bulls

Source: TradingView

The RBNZ's hawkish tilt has helped support NZD/USD over recent weeks, allowing the pair to reclaim a cluster of key medium and long-term moving averages.

For now, though, it's a game of ping-pong. Buyers continue to emerge on dips towards the 100-day moving average, while rallies are being capped ahead of resistance at 0.5860. That's the initial range to watch.

The oscillators continue to favour the bulls. RSI (14) remains comfortably above the neutral 50 level at 63, while MACD has crossed above its signal line and remains in positive territory.

Should the pair break decisively above 0.5860, the next upside level to watch is 0.5920, an area that repeatedly acted as both support and resistance during April, May and June. Above that, attention shifts to 0.5992, the double top established earlier this year.

On the downside, initial support is provided by the 100, 200 and 50-day moving averages, along with horizontal support at 0.5796, another level that has repeatedly acted as both support and resistance in recent weeks. A break beneath the latter could open the door for a retracement towards 0.5747, with 0.5724 and the uptrend from the June lows the next levels to watch.

Breakdown keeps bears in control

Source: TradingView

As flagged earlier this month, AUD/NZD has broken below the uptrend from the June 2025 lows, with the pair also slipping beneath the 50 and 100-day moving averages. Along the way, it took out support at 1.2053 and 1.2000 before finding buyers at 1.1950.

For now, the pair is stuck in a narrow range between 1.2000 and 1.1950. We did see a bullish engulfing candle print on Monday following renewed upside in energy prices as the conflict in the Middle East escalated. However, that has not generated follow-through buying, with rallies continuing to stall ahead of 1.2000.

The message from the oscillators remains bearish. RSI (14) continues to set lower highs and sits well below the neutral 50 level at 33. That bearish message is being reinforced by MACD, which remains below its signal line and in negative territory.

Selling rallies and downside breaks remains the preferred strategy. Should the pair break decisively beneath 1.1950, there is little in the way of technical support until the 200-day moving average at 1.1835, followed by 1.1797, former resistance before February's upside breakout.

Should the pair reclaim 1.2000, the next upside levels to watch are 1.2053, followed by the confluence of the 100-day moving average and resistance at 1.2115. For now, though, selling rallies and downside breaks remains the preferred strategy.

From a fundamental perspective, with New Zealand's inflation report now out of the way, attention will quickly shift to Australia's labour force report on Thursday. Alongside broader risk sentiment, the release is likely to be influential on markets' assessment of the directional risks for the RBA cash rate moving forward.

Manufacturing survey delivers blockbuster upside surprise RBNZ tightening cycle gains fresh credibility RBA rate expectations continue to unwind AUD/NZD technical breakdown gains momentum NZD/USD breakout shifts focus higher New Zealand may be on holiday, but the Kiwi dollar certainly wasn't on Thursday. It topped the G10 FX leaderboard after strong data reinforced the RBNZ's message from earlier this week that further rate hikes are likely.

Factory floor fires up The catalyst for the outperformance was a blockbuster BNZ PMI. The headline index surged to 59.7 in June, its highest reading since July 2021. Excluding the pandemic rebound, it was the strongest result since May 2017, underpinned by a sharp lift in new orders, production, deliveries and employment. Respondents reported stronger sales, growing order books and renewed confidence, outweighing concerns about Middle East tensions and cost-of-living pressures.

A hawkish roadmap The survey's release was timely, arriving just days after the RBNZ lifted its cash rate to 2.5%, the first increase of a new tightening cycle. Policymakers retained a hawkish bias, saying "some further reduction in monetary stimulus is likely to be required" to return inflation sustainably to the 2% target midpoint.

Speaking after the decision, RBNZ Governor Anna Breman said they were "feeling our way" as they sought to identify New Zealand's neutral cash rate, the level where it is neither stimulatory nor restrictive on economic activity. She suggested it may sit somewhere between 2.5% and 3.5%, implying 3% may be the Bank's initial destination for policy.

Mind the gap That’s important because relative rate expectations have long been one of the key macro drivers for AUD/NZD, making recent shifts in pricing on either side of the Tasman particularly important.

Source: Bloomberg

While the RBNZ has just embarked on a fresh tightening cycle, the RBA is likely much closer to the end of its own, or perhaps already there, after lifting its cash rate three times, unwinding the easing conducted in 2025. Although it has left the door open to further increases, softer domestic economic data and easing energy prices have seen markets scale back expectations for additional tightening. Just a few months ago, traders were flirting with the idea that the cash rate may need to near 5%. Today, there's only around an even chance of another 25 basis point increase to 4.60%.

Source: Tradingview

Thursday's data saw the Australia-New Zealand two-year yield spread compress by 14 basis points, the largest one-day decline since March 9. While the catalyst was New Zealand's stronger-than-expected manufacturing PMI, the broader narrowing in spreads has been driven just as much by the steady unwinding of hawkish RBA pricing over recent months.

Connecting the dots The rates relationship is evident in the correlation matrix below, with Australia-New Zealand two-year yield spreads maintaining a consistently positive correlation with AUD/NZD across the past week, month and quarter.

Source: Tradingview

Energy prices have also been somewhat influential. While both Australia and New Zealand are heavily reliant on imported petroleum, Australia is also one of the world's largest LNG exporters. It's perhaps no surprise then that AUD/NZD has also maintained a strong positive correlation with LNG prices over the past month, particularly over the past week, reflecting the terms of trade impact of fluctuations in gas prices on the Australian dollar.

AUD/NZD trendline snaps

Source: Tradingview

It's not only fundamentals that are pointing to the risk of Kiwi outperformance against the Australian dollar, with the technical picture increasingly aligning with that view. Thursday saw AUD/NZD break below its June 2025 uptrend, doing so emphatically while also slicing through the 100-day moving average, a level it had remained above since July last year.

The breakdown follows the formation of a series of lower highs and the completion of what resembles an evening star bearish reversal after the pair spent several sessions flirting with the 50-day moving average earlier this week. The question now is whether Thursday's breakdown attracts another wave of selling on Friday.

The immediate focus is the June 10 low at 1.2053. Should that give way, attention shifts to 1.2000, a level that's repeatedly acted as both support and resistance in recent months, followed by 1.1950. Below that sits the 23.6% Fibonacci retracement of the May 2025-June 2026 bull move, a level the pair also spent considerable time trading around back in March. The 200-day moving average at 1.1813, sitting just above the former breakout level at 1.1797, shapes as a more ambitious downside target.

Overhead, the broken June 2025 uptrend and 100-day moving average, located just below 1.2100, combine with horizontal resistance at 1.2115 to create an important resistance zone should buyers attempt to regain control.

Momentum indicators continue to favour the bears. RSI (14) is trending lower below 50 without yet reaching oversold territory, while MACD has crossed below its signal line and continues to diverge in negative territory, favouring selling into strength and downside breaks.

NZD/USD triangle delivers

Source: Tradingview

There are also signs the improving backdrop is beginning to spill over into NZD/USD. As noted yesterday, the pair was threatening to break higher from an ascending triangle, a move that's since played out through the European and North American sessions.

The breakout shifts the focus to 0.5774, a level that's repeatedly acted as both support and resistance this year. A sustained move above there would bring a cluster of key moving averages into view, starting with the 50-day moving average at 0.5815. While the 50-day moving average has recently crossed below the 200-day moving average, completing a death cross, that signal is being overridden by the improving fundamental backdrop and recent price action. Should that view prove misplaced and a retracement unfold, the former breakout level at 0.5724 is the first area to watch for support.

Momentum indicators point to the potential for further gains. RSI (14) continues to trend higher and has reclaimed the neutral 50 level, while MACD has completed a bullish crossover. Although it remains below zero, it's continuing to push higher, suggesting the bearish momentum that dragged NZD/USD to fresh 2026 lows in late June has dissipated and may be in the early stages of reversing, pointing to the potential for an extension of Thursday's breakout.