AUD/NZD Price Forecast: Aussie could test previous highs around 1.2490 as support

• After reaching 13-year highs above 1.2600, AUD/USD retreats towards 1.2520.
• The RBNZ’s decision to keep interest rates unchanged sent the Kiwi sharply lower across the board.
• Overbought conditions have emerged for the pair across most timeframes.

An unexpected pause at Wednesday’s Reserve Bank of New Zealand (RBNZ) monetary policy meeting has sent the Australian Dollar (AUD) sharply higher against a weakening New Zealand Dollar (NZD). However, after reaching multi-decade highs near 1.2600, AUD/NZD has become heavily overbought. The pair has since retreated during the Asian session towards the former resistance zone around 1.2490.

Despite market expectations of a quarter-point rate increase, the RBNZ held its Official Cash Rate (OCR) at 2.75% earlier on Wednesday. The decision triggered broad-based losses in the Kiwi Dollar, although it recovered some ground shortly afterwards as Governor Anna Breman signalled the possibility of further monetary tightening in December.

September’s Australian Consumer Price Index (CPI) figures, published earlier in the day, also lent support to the Aussie. Inflation quickened to 0.8% from 0.4% in August, while annual CPI inflation increased to 4.3% from the previous month’s 4%.

The Reserve Bank of Australia (RBA) Trimmed Mean CPI also increased on a quarterly basis, reaching 1% from 0.8%, while holding at 3.6% compared with the same quarter last year. The readings increase pressure on the central bank to deliver its fifth rate rise this year at next week’s monetary policy meeting.

Technical Analysis: Overbought conditions leave the pair exposed to a deeper correction

A sharp breakout from the horizontal range that contained AUD/NZD for the past seven weeks has driven the 4-hour Relative Strength Index (14) close to 80. Such heavily overbought readings often precede a correction.

Positive readings on the Moving Average Convergence Divergence (MACD) histogram indicate that near-term momentum remains constructive. Nevertheless, bullish momentum has eased, leaving scope for a test of support around 1.2490, the top of the previous range, before the advance resumes.

Should the correction deepen, attention would turn to the lows of 21, 22 and 26 October around 1.2370. Beyond those lies the key support zone around 1.2275, marked by the lows of 10 September and 16 October.

Any renewed advance is likely to face a test at the session high of 1.2609. Above that, 1.2642, the 127.2% Fibonacci extension of the August-September rally, appears to be a plausible target.

(The technical analysis of this story was written with the help of an AI tool. Know more.)