AUD/JPY, AUD/NZD, NZD/USD analysis: RBA mins down, RBNZ up next

The RBA minutes did little to alter my view that the 4.35% cash rate is likely to remain longer than many would like. But they have hinted that the odds of a hike may be slightly higher given the easing of financial conditions alongside a pickup in credit growth.

While they tipped their hat to weaker growth, quarterly inflation remains “too high” for their liking. Furthermore, they expect data to show that consumption growth and real disposable income have increased in the second half of year, though they’re not sure what degree they may have accelerated. As for the labour market, employment growth remains strong and conditions remain tight, even if unemployment has risen gradually.

The board said that rates may need to be tightened should financial conditions prove insufficient to return inflation to target. And a hike could now be more plausible given the easing of financial conditions and pick-up in credit growth in recent months.

Cuts could be considered if the labour market weakened more sharply than forecast (which I sense as unlikely),

AUD/JPY technical analysis:

The risk-off tone on Monday saw AUD/JPY fall in line with Wall Street indices and form a bearish engulfing day. Should sentiment continue to sour, AUD/JPY could get dragged lower with it. A bearish divergence has formed on the daily RSI (2), and prices have already seen a decent swing higher since the lows around 94.

However, should tensions in the Middle East recede and allow stocks to continue their rally, AUD/JPY may have better luck holding above the 200-day MA and 200-day EMA. And that means prices are currently trading around a pivotal area.

The 1-hour chart shows a 2-bar bullish reversal (bullish piercing line) and a small bullish divergence on the RSI (14), which was recently oversold. Intraday bulls could seek dips towards Monday’s low for a near-term swing trade, using the 100.50 or 1001 handles as potential targets. Yet traders should continue to monitor sentiment elsewhere to see if it a aligns with a sustainably bullish move.

A break beneath the 200-day EMA (99.42) assumes a retracement on the daily chart is underway.

NZD/USD technical analysis:

Bets are on that the RBNA will deliver a 50bp cut tomorrow, followed by another 50bp cut in December. NZD/USD has fallen for five consecutive days during its worst such run since July, although it has fallen -4.2% from last week’s high already.

What if the RBNZ’s cut is not as dovish as expected, or opt for a cautious 25bp cut? I suspect we could be in for some profit taking and a bump higher for NZD/USD. As the RBNZ will likely need to provide a very dovish 50bp cut (with hints of another oversized cut tomorrow) for this selloff to continue, with another helping of risk-off sentiment.

AUD/NZD technical analysis:

If the Kiwi dollar strengthens due to a less-dovish-than expected meeting, the AUD/NZD could appeal to bears. Once again, the cross has stalled around the May high, and momentum is now pointing lower after Monday’s bearish pinbar closed back beneath the May high. Bears could seek to target a deeper pullback towards the 1.0

944 highs.

However, if the RBNZ come out swinging with a very dovish cut, AUD/NZD could appeal to bulls seeking a break above the May high. We would then prefer to see evidence of a swing low around support areas such as 1.0944 or 1.0980.

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge