AUD/NZD Price Forecast: Could the Aussie test previous highs around 1.2490 as support?

• After touching 13-year highs above 1.2600, AUD/USD retreats towards 1.2520.
• Broad-based losses hit the Kiwi after the RBNZ kept interest rates unchanged.
• Overbought conditions now prevail for the pair across most timeframes.

A sharp advance in the Aussie Dollar (AUD) against a weakening New Zealand Dollar (NZD) on Wednesday follows the Reserve Bank of New Zealand’s (RBNZ) surprise decision to pause at its monetary policy meeting. However, heavily overbought conditions have emerged in AUD/NZD after it touched multi-decade highs near 1.2600. During the Asian session, the pair has retreated towards the former resistance zone around 1.2490.

A broad sell-off in the Kiwi Dollar followed the RBNZ’s decision earlier on Wednesday to retain its Official Cash Rate (OCR) at 2.75%, rather than deliver the quarter-point increase markets had expected. Some of those losses were recovered soon afterwards, as Governor Anna Breman signalled the possibility of further monetary tightening in December.

The Aussie also drew support from Australia’s Consumer Price Index (CPI) release earlier in the day. September inflation quickened to 0.8%, compared with 0.4% in August, while the annual CPI reading increased to 4.3% from the previous month’s 4%.

The Reserve Bank of Australia (RBA) Trimmed Mean CPI, meanwhile, climbed to 1% from 0.8% on a quarterly basis, with the year-on-year reading holding steady at 3.6%. Together, the figures put the central bank under greater pressure to deliver its fifth rate increase this year at next week’s monetary policy meeting.

Technical Analysis: Could overbought conditions trigger a deeper correction?

The breakout in AUD/NZD above its horizontal range of the past seven weeks has been sharp enough to lift the 4-hour Relative Strength Index (14) close to 80. Such deeply overbought readings often precede a correction.

Near-term momentum remains constructive, as indicated by the positive Moving Average Convergence Divergence (MACD) histogram. The bullish push has nevertheless weakened, leaving scope for a test of support near 1.2490, the former range ceiling, before the pair resumes its advance.

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

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

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