The AUDNZD climbed to a fresh monthly high of 1.2861 ahead of Australia’s employment report, but the fresh batch of data may drag on the exchange rate should it dampen the fundamental outlook for the $1T economy. Although job growth is expected to hold flat in June, the unemployment rate is expected to increase to 5.2% from 5.1% in May, and a dismal development may ultimately produce a reversal in the AUDNZD as it raises the scope for another rate cut by the Reserve Bank of Australia.
As the AUDNZD struggles to push back above the 38.2% Fibonacci retracement from the 2011 high to low around 1.2650-60, we should see the downward trend from 2011 continue to take shape, and we may have an opportunity to get back short the AUDNZD should the data fall short of market expectations. According to Credit Suisse overnight index swaps, market participants see the RBA lowering the interest rate by another 100bp over the next 12-months while the RBNZ is expected to sit pat, and the deviation in the policy outlook continues to foster a bearish outlook for the pair as Governor Glenn Stevens continues to embark on the easing cycle.
