The Australian Dollar’s rally against the New Zealand Dollar has hit a wall, with AUD/NZD retreating sharply from its strongest level in over a decade. Rabobank Senior FX Strategist Jane Foley warns the pair’s year-long uptrend now faces serious downside risk following the pullback from 2013 highs.
The reversal comes as the Reserve Bank of New Zealand adopts an increasingly hawkish stance, supporting the Kiwi dollar against its Australian counterpart. This shift in relative central bank positioning has undermined the Australian Dollar’s extended outperformance, which had been driven by diverging economic conditions across the Tasman.
Traders holding long AUD/NZD positions face potential continuation of losses if the RBNZ maintains its aggressive monetary policy rhetoric. The breakdown from multi-year highs suggests momentum has shifted, threatening to unwind months of gains for those betting on Australian Dollar strength.
FXnCO Insight
Cross-traders should monitor upcoming RBNZ communications closely, as sustained hawkish messaging could accelerate AUD/NZD downside and invalidate the bullish trend established throughout the past year.
Source: FXStreet