Market analyst Patricio Martin wrote that the New Zealand Federal Reserve will hold a meeting on Wednesday, July 10th, and although New Zealand's economic performance still shows signs of struggling, the fundamentals are leaning towards the Australian dollar.

Market forecast for the New Zealand Federal Reserve to maintain stability this week

The focus of market attention is on persistent concerns, such as the sluggish economic outlook in New Zealand and the decision of the Federal Reserve of New Zealand this week. Other data that needs attention are consumer inflation expectations on Wednesday and Thursday, as well as the New Zealand PMI, which may drive the trend of the New Zealand dollar.

The Shadow Committee of the New Zealand Institute of Economic Research suggests that the Federal Reserve of New Zealand maintain its official cash rate at 5.50% in July. At present, the market also expects that the New Zealand Federal Reserve will maintain interest rates unchanged on Wednesday, but will maintain a hawkish stance.

Although the market is betting on a 60% chance of raising interest rates by the end of the year, as shown in the May interest rate path forecast of the Federal Reserve of New Zealand, the market strongly expects a rate cut in November. Considering the slowdown in New Zealand's economic growth, some even expect to cut interest rates in October.

Meanwhile, in Australia, the latest hot inflation data has raised market expectations. The market currently believes that the probability of the Reserve Bank of Australia raising interest rates by 25 basis points at its meeting on September 24th is close to 40%, and it will rise to around 50% by November 5th. The Reserve Bank of Australia has recently been considering raising interest rates to benefit the Australian dollar.

Technical Analysis of AUD/NZD Exchange

In the short term, the Australian dollar maintains a bullish trend against the New Zealand dollar, with the RSI index around 70. However, the near overbought situation indicates that the possibility of correction is imminent and should be treated with caution.

The support levels for the Australian dollar against the New Zealand dollar are at 1.0950, 1.0930, and 1.0900. The buyer will focus on 1.1000 as the next resistance target.

The correction may be imminent, but as long as the AUD/NZD remains above the 20 day, 100 day, and 200 day simple moving averages (SMA), the outlook remains bullish.