The Australian dollar is down against the New Zealand dollar during the trading session on Thursday, swimming against the current of the major uptrend that we have seen.
This has been a strong run higher over the last couple of weeks, and quite frankly, it is just going to be thought of more or less as consolidation at this point.
The policy divergence between the RBA and the RBNZ remains the main driver here. The Australian side has turned increasingly hawkish as RBA Deputy Governor Andrew Hauser has emphasized persistent inflation risk, and Australian markets and economists are increasingly considering another rate hike, potentially as soon as the September 28 and 29 meeting. That is supportive for the Australian dollar, as the market is being forced to price a higher-for-longer situation going forward.
Today's slight pullback looks more like profit-taking after the recent breakout than a clear change in the macro story.
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The AUD/NZD pair has gained roughly 2 big figures in just over a week. The relative rate story currently favors Australia, with the RBA dealing with persistent domestic inflation and a still-resilient economy, making additional tightening credible. Hauser's recent rhetoric has reinforced the perception that the RBA has relatively little tolerance for inflation remaining above target.
The technical picture remains very bullish, with the 1.23 level offering support and the 1.2250 level offering support on pullbacks. Currently, this is one of the cleaner charts that I am looking at, as it has a nice, clean breakout at this point, unlike so many others.
With that being said, I remain bullish in this market and fully anticipate further gains down the road. This is a pair that is normally slow-moving, so a bit of patience might be needed here, but it does tend to trend quite nicely.
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