AUD NZD

The consensus is 50bp, market pricing leans towards 75bp. Whatever the RBNZ decide to do today, it comes down to whether they will signal further cuts, as to whether NZD/USD continues to depreciate or bounce on a "sell the rumour, buy the fact" reaction.

AUD/JPY looks to Wall Street for its next directional move while NZD/USD is down for a fifth day ahead of tomorrow's RBNZ meeting. But if they fail to deliver a dovish 50b cut, it could prompt profit taking from bears and weigh further on AUD/NZD.

Commodities continued to feel the pressure of growth concerns, which weighed broadly on the Australian dollar. AUD/NZD managed to close beneath its 200-day and 200-week average on the same day and looks like it wants to text 1.07, although AUD/USD looks like it could muster a small bounce from current support levels.

AUD/NZD looks set to capitalise on its rise from Friday's, which could be helped by even a slightly dovish RBNZ meeting. SPI 200 futures were higher overnight to suggest the ASX 200 could break to the upside from its daily compression pattern.

It could be an interesting week for the Australian dollar if caught between the crossfire of the RBNZ meeting, Fed talk and US inflation data. We also have an Australian inflation report to throw into the mix for good measure.

We noted the tendency for US indices to begin a retracement on December 7th according to its seasonality, so it is interesting to note the 2-day bearish reversal on the Nasdaq on Wednesday. AUD/NZD is also on the watchlist for a potential long as it approaches a key area of support.

Whilst the RBNZ were expected to hold, their statement struck a hawkish tone by stating that “inflation remains too high”. And with traders front-loading a weak CPI print for the US later this week it has catapulted the New Zealand dollar higher.

The RBNZ held their cash rate steady for the first time following 12 consecutive hikes, whilst AUD/USD broke above its 200-day MA ahead of a key US inflation report.

December’s employment report raised a few eyebrows, as it was the first in a while to miss expectations and prompted us to question whether cracks were appearing in the economy. January’s report suggests there are.

Australia’s retail sales were down a lot more than expected in December, suggesting much of the hype had died over the Black Friday Sales and Cyber Sales Monday in November.

There’s no escaping the fact that Australian inflation continues to point the wrong way for the RBA and consumers alike. And today’s report should quickly eradicate hopes of an RBA pause in February.

If AUD/NZD can break above the top of its current flag pattern, it may be on its way to the flag target above 1.1000.

As long as AUD/NZD is below 1.0860 (the 38.2% Fibonacci retracement level) the bounce is shallow.

The RBA used the last meeting of the year to hike interest rates by another 25bp – its eighth hike in as many meetings.

If the RBNZ hike by 75bp tomorrow in line with the consensus, it will be their first hike of this magnitude on record.

With the RBA only hiking rates by 25bps at each of the last two meetings, the RBNZ is the more hawkish of the two central banks.

Economic data beats are usually a good thing, unless it is in the guise of much higher than expected (and already elevated) inflation.