The Australian dollar heads into the week with meaningful hawkish support after Australia's Q2 GDP report surprised sharply to the upside. The surprise lifted the market-implied probability of a September RBA rate hike from 48% to 57%, while a November increase is now more than fully priced. Governor Bullock's board has already flagged upside inflation risks linked to Middle East-driven energy costs, and rising Australian bond yields — which this week touched their highest level since April 2011 — are reinforcing that hawkish backdrop.

Across the Tasman, the RBNZ delivered exactly what all five major New Zealand bank economists anticipated on Wednesday: a 25-basis-point hike to 2.75%, the second consecutive increase following July's tightening. Headline inflation remains elevated at 4.1%, but the central bank's own projections point to a likely pause in October before a possible resumption in December, leaving markets pricing only a roughly 30% chance of another hike this year.

The outcome is two central banks both firmly in tightening mode, though the RBA's path still carries more near-term uncertainty than the RBNZ's, whose next move appears broadly telegraphed through year-end. For a cross such as AUD/NZD, this matters because the pair is largely insulated from broader US dollar swings: its direction is driven primarily by the relative interest-rate expectations of the two currencies, so any divergence in the pace or perceived terminal level of RBA versus RBNZ tightening tends to translate more directly into the exchange rate than in dollar pairs. Traders will therefore be watching upcoming Australian inflation and labour-market prints, alongside the RBNZ's October meeting, as the most likely catalysts for the pair's next directional break.

Technical Analysis of AUD/NZD

As the AUD/NZD chart shows, the pair staged a sharp rally from the 1.19633 low, riding a steep ascending trendline that has powered the entire late-August advance. The rally has since met resistance near the 1.22897 high — the 0 Fibonacci level — where price is now consolidating just above the 0.236 retracement near 1.22127, wedged between a shorter-term descending trendline drawn from this week's peak and the broader medium-term descending trendline that has capped the pair since late June.

Bullish Scenario

If buyers defend the 0.236 retracement and the ascending trendline while pushing above the short-term descending trendline, the path would open toward a retest of the 1.22897 high. A confirmed break above that level would mark a genuine shift in the broader multi-month structure.

Bearish Scenario

Conversely, a break below the 0.236 level and the steep ascending trendline would expose the intermediate 1.213–1.215 support zone, coinciding with the 0.5 Fibonacci retracement. A deeper slide through that zone would risk a fuller retracement of the late-August rally, back toward the 0.618–0.786 area near 1.203–1.209.

With price squeezed between a reclaimed short-term trendline, a defended ascending trendline, and the long-term descending trendline, AUD/NZD appears poised for a decisive move. Will the RBA's hawkish momentum carry the pair through resistance, or will the broader downtrend in place since June reassert control?

Source: FXOpen Blog