AUD/NZD drops to multi-day low, flirts with 1.0800 confluence support post-RBNZ decision

• AUD/NZD drops to a multi-day low in reaction to the RBNZ's hawkish outlook.
• The central bank forecasts the OCR to remain at 5.5% through December 2024.
• China's economic woes also contribute to the Aussie's relative underperformance.

The AUD/NZD cross comes under heavy selling pressure after the Reserve Bank of New Zealand (RBNZ) announced its policy decision and dives to a multi-day low during the Asian session on Wednesday. Spot prices currently trade around the 1.0800 mark, which bears now awaiting a break below the 100-day and the 200-day Simple Moving Averages (SMAs) confluence before positioning for a further pullback from a two-and-half-week high set on Tuesday.

As was widely anticipated, the RBNZ decided to maintain the status quo and keep the key Official Cash Rate (OCR) steady at 5.50%. The New Zealand Dollar (NZD), however, strengthens a bit in reaction to hawkish RBNZ meeting minutes, which indicated that interest rates will remain at a restrictive level for some time. Adding to this, the central bank now forecasts OCR at 5.5% through December 2024 and then fall to 3.38% by September 2026. This, in turn, is seen dragging the AUD/NZD cross lower for the second successive day.

Apart from this, concerns about the worsening economic conditions in China – Australia's largest trading partner – turns out to be another factor behind the Aussie relative underperformance and contributes to the offered tone surrounding the cross. The downside, however, seems cushioned, at least for the time being, as traders might refrain from placing aggressive bets and prefer to wait for RBNZ Governor Adrian Orr's remarks at the post-meeting press conference. This, in turn, warrants some caution before positioning for further losses.

Technical levels to watch