AUD/NZD – The Curious Case of RBA vs RBNZ

The Reserve Bank of Australia Governor Glenn Stevens testified before the Australian Parliament today, in which he was surprisingly hawkish. Stevens said the Australian economy will eventually transit from the mining industry, which is totally different from what the Feb RBA meeting minutes have stated. In which, RBA has expressed concerns that the mining sector will peak in 2013, lowering growth potential for the rest of Australia’s economy. So much was the concerns that Stevens stated that Australia was ready to ease if necessary, but it seems that the “if necessary” scenario will not be coming soon unless Stevens is proven wrong in his prediction. In any case, whether Stevens’s bullish forecast of Australia’s health is correct or not, rates are not going to change in the next few months as he said that Australian interest rates are “appropriate” now.

This week has been a peculiar week in the Oceania continent. Before this week started, people’s perception of RBA was a dovish one and RBNZ as a hawkish one. However in the short span of 1 week, the roles are totally reversed. RBNZ’s Wheeler as signaled that they are watching NZD’s strength closely, despite PM Keys and Fin Min English being sanguine about it. Wheeler specifically mentioned that slashing the benchmark rate is a viable option to bring NZD lower if needed, which was exactly what RBA said back in early Feb. The reason for both Governors to backtrack their previous stance is currently unknown, but traders and Central Bank watchers have their eyebrows raised and wonder if anybody spiked their drinks during the G20 meeting recently.

Hourly Chart

Bulls of AUD/NZD should not be too happy right now. Even though price is moving higher after Stevens’ address, the peak is a pale shadow of what we’ve seen 2 days ago. Ichimoku is also maintaining the bearish Kumo. Though the Kumo has provided support against the current pullback, the thin nature of the cloud allows price to pierce through easily should bearish momentum continue at this pace, which will add on to bearish pressure should that happen.

Daily Chart

Price has also not been able to shake off the bearish bias on the Daily Chart. Despite a few days of recovery, Feb is still a losing month for AUD/NZD, and that knowledge will add even more pressure against bullish moves. Kijuu-Sen (red) is also acting as a resistance against rallies, and even if price rally up in the next few days, we’ll see more resistances in the form of the bearish Kumo and Stochastic levels, which will most likely be in the Overbought region should that happens.

Fundamentally, if RBA indeed stay hawkish and RBNZ dovish, we could easily see price giving back the losses it’s suffered since Nov 2012. However, that scenario depends on both RBA and RBNZ staying true to their word, which they have failed to do so this time round.

More Links:
AUD/USD – Steady After Recent Losses

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