Australian Dollar Dips Against New Zealand Dollar Amid Falling Consumer Sentiment
The Australian Dollar (AUD) has slipped against the New Zealand Dollar (NZD), trading just above 1.2400 after a three-session climb from near 1.2300. The decline follows a significant drop in Australian consumer sentiment, which fell 4.7% to 80.4 in October. The Reserve Bank of Australia's (RBA) interest rate hike on September 29 contributed heavily to this sentiment shift, with those surveyed after the decision reporting a sentiment level of 67.2, a figure last seen during the early-1990s recession.
The RBA's cash rate now sits at 4.60%, its highest since 2011, and 1.85 points above the Reserve Bank of New Zealand's (RBNZ) 2.75%. This interest rate gap has influenced the AUD/NZD exchange rate, which peaked just under 1.2500 on September 22. However, with the RBNZ expected to hike rates by December, the gap could narrow before the RBA's next meeting on November 3.
Market expectations for Australian inflation stand at 4.9%, above the RBA's target band of 2%-3%. The Australian Industry Group (AiG) index for August and consumer inflation expectations for October are key upcoming data points. A reading above 4.9% could support another RBA hike, potentially pushing AUD/NZD back toward 1.2450. Conversely, a softer reading would leave the exchange rate more dependent on the RBNZ's actions.
Technical analysis suggests a downward bias for AUD/NZD below 1.2450, with support levels at 1.2400, 1.2350, and 1.2300. The daily Stochastic Relative Strength Index (Stoch RSI) remains in a downward trend, indicating continued momentum to the downside. A daily close above 1.2500 would reverse this outlook.