CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

AUD/NZD technical breakout on RBA rate hike

The Reserve Bank of Australia (RBA) surprised markets with its first interest rate of the new tightening cycle by hiking 25bps to take rates from a record low 0.1% to 0.35%.  Market expectations were for a hike of only 15bps.  The central bank will also stop reinvesting proceeds of maturing bonds, which means it will begin quantitative tightening.  In addition, the RBA updated its inflation forecast for 2022 to 6% from 5.1%.  See my colleague Tony Sycamore’s recap here.  As a result of suddenly turned hawkish RBA’s surprise decision, AUD/NZD has broken out above some key technical levels.

 

Trade AUD/NZD now: Login or Open a new account!

• 
Open an account in the UK
• 
Open an account in Australia
• 
Open an account in Singapore

 

On a weekly timeframe, AUD/NZD had been trading lower in an orderly channel since October 2013 (green lines).  After testing the upper trendline of the channel over the past few weeks near 1.0925, today’s news caused the pair to burst higher and take out the top trendline of the channel.  In addition, AUD/NZD traded above horizontal resistance at 1.0439, reaching its highest level since August 2018!  However, notice that the RSI is in overbought territory, an indication that AUD/NZD may be ready to pull back in the long-term.

Source: Tradingview, Stone X

If price does continue higher, the next resistance level on the daily timeframe isn’t until the highs from August 2018 at 1.1176.  Above there, AUD/NZD can trade to the 127.2% Fibonacci extension from the highs of august 2020 to the low of September 2021 near 1.1252 and then horizontal resistance, once again, from the highs of October 2017 near 1.1290.

Source: Tradingview, Stone X

On a 240-minute timeframe, AUD/NZD had been moving higher in an ascending wedge formation.  On April 22nd, price broke below the wedge and pulled back to the 38.2% Fibonacci retracement from the lows of March 15th to the highs of April 20th, near 1.0825.  In addition to testing the horizontal resistance at 1.0439 on the weekly timeframe, price is also testing the underside of the rising wedge.  If the trendline holds and confirms the RSI on the weekly timeframe, first support is at the April 20th lows of 1.0825. Below there, support crosses at the 50% retracement level and the 61.8% Fibonacci retracement level from the same timeframe at 1.0807 and 1.0762, respectively.

Source: Tradingview, Stone X

The RBA’s surprise hike caught AUD/NZD traders with their guard down.  As a result, the pair traded to its highest level since August 2018.  Watch to see if price can hold above the key breakout levels on the weekly and daily timeframes. 

Learn more about forex trading opportunities.


StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024