AUD/NZD snaps two-day downtrend as bulls approach 1.1050 after RBNZ's rate lift

• AUD/NZD takes the bids to refresh daily top, rises for the first time in three day.
• RBNZ matches market expectations of 0.50% rate hike but Rate Statement appeared to have drowned NZD.
• Risk appetite remains cautiously optimistic ahead of the key data/events.
• China trade numbers, US inflation are crucial catalysts to watch for intraday directions.

AUD/NZD surges to 1.1050 after the Reserve Bank of New Zealand (RBNZ) announcements during Wednesday’s Asian session. In doing so, the cross-currency pair fails to cheer the RBNZ’s 0.50% rate hike as the Rate Statement raised doubts about the Pacific nation’s short-term economic conditions.

RBNZ matches the market’s forecasts of increasing the Official Cash Rate (OCR) by 50 basis points (bps) to 2.5%, announcing the year’s fourth rate hike. However, downbeat comments from the Rate Statement seem to weigh on the New Zealand dollar (NZD) after the RBNZ announcements. “Committee noted that while there are near-term upside risks to consumer price inflation, there are also medium-term downside risks to economic activity,” per the latest RBNZ Rate Statement.

Elsewhere, the market’s cautious optimism appears to have favored AUD/NZD buyers even if optimists are being probed by the cautious mood ahead of the US Consumer Price Index (CPI) for June, expected to rise to 8.8% YoY from 8.6%. The reason for the mildly positive sentiment could be linked to the upbeat White House (WH) statement and softer US data.

As per Reuters, “The US economic data, including the June jobs report, are not consistent with a recession in the first or second quarters,” the White House said in a memo released on Tuesday. The news contributed to the market’s profit booking moves ahead of the key data/events. Further, the US NFIB Business Optimism Index for June slumped to the lowest since early 2013 while flashing 89.5 figures versus 93.1 prior.

Additionally, chatters that the latest jump in Shanghai’s covid numbers was inside the quarantine area and was well expected also likely to have favored the AUD/NZD rebound.

Against this backdrop, S&P 500 Futures and the US 10-year Treasury yields both snap a two-day downtrend by the press time, even if flashing mild gains of late.

Moving on, China trade data for June and US CPI will be crucial for the pair traders to watch. Also important will be the risk catalysts like covid updates and chatters surrounding inflation and recession.

Technical analysis

Although an upside break of the 50-DMA, around 1.1040 by the press time, keeps AUD/NZD bulls hopeful, a downward sloping resistance line from June 28, close to 1.1095 at the latest, could challenge the pair buyers.