AUD/NZD attempts to build a cushion around 1.1170 ahead of RBA policy

• AUD/NZD is defending the immediate support of 1.1170 as focus shifts to RBA.
• A fourth consecutive 50 bps OCR hike is expected from the RBA next week.
• Upbeat Building Permits strengthened the kiwi bulls.

The AUD/NZD pair has turned volatile as aussie bulls are fighting firmly to defend the crucial support of 1.1170 in the early Tokyo session. The asset is expected to remain sideways further amid the unavailability of a potential trigger. However, investors are focusing on September’s monetary policy announcement by the Reserve Bank of Australia (RBA), which is due next week.

Aussie bulls are attempting to defend the cushion of 1.1170 despite the weaker release of the Mfg index by the Australian Industry Group (AIG). The economic data landed at 49.3, significantly lower than the prior release of 52.5. As the RBA is hiking its Official Cash Rate (OCR) consecutively with bumper size, cheap money is disappearing from the economy. Due to the unavailability of cheaper money, companies are left with limited funds, which they are deploying in ultra-filtered investment opportunities only.

Next week, RBA Governor Philip Lowe is expected to announce the fourth consecutive 50 basis points (bps) interest rate hike. As price pressures have reached rooftops in the Australian economy, restrictive monetary policy is highly expected to fix the inflation chaos.

Meanwhile, the kiwi dollar got strengthened after the release of the upbeat Building Permits data. The economic data improved dramatically to 5% against the prior release of -2.2%. After a clarity from the Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr on guidance over interest rates, investors have supported kiwi against aussie. RBNZ’s Orr announced two more rate hikes ahead this year to tame the inflationary pressures at Jackson Hole Economic Symposium.