A strong 2-day rally this week suggests AUD/NZD has printed its swing low at 1.07266. Whilst NZ inflation data was stronger than expected in Q2 and saw AUD/ZD pull back to 1.0800, we suspect it is still lower from the prior reads to allow the RBNZ to hold rates steady with an economy already in a recession.
We therefore see today's retracement lower to 1.080 as a potential gift for bulls, and for a move to 1.0900 or even 1.1000 over the coming weeks. The RBA may still have to hike once or more and that could see expectations of a lower RBNZ-RBA cash rate and support AUD/NZD.
A break beneath this week's low invalidates the bullish bias.