AUD/NZD exchange rate rising wedge nears confluence

The AUD/NZD price drifted downwards on Thursday after the relatively weak Australian jobs data. It pulled back below the important support at 1.100 as traders assessed the impact of these numbers on the actions of the Reserve Bank of Australia (RBA). 

Australian job market cools

The AUD to NZD cross retreated after the latest Australian jobs numbers. According to the Australian Bureau of Statistics (ABS), the country’s unemployment rate rose from 3.5% in December to 3.7% in January. This increase was worse than the median estimate of 3.5%. Still, the labor market remains tight, with many technical companies struggling to fill roles. 

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The economy lost another 11k jobs in January after it lost another 14.6k in December. Economists polled by Reuters were expecting the data to show that the economy added about 20k jobs during the month. The participation rate dropped slightly to 66.5%.

These numbers were notable because they came a day after Philip Lowe, the head of the RBA, insisted that the bank would continue hiking interest rates in a bid to slow the relatively high inflation rate. Recent data showed that the headline inflation stands at 7.8%. In his statement, he said that the tightening had not slowed down consumer spending, which is needed to bring inflation down. Analysts now expect about 3 more RBA rate hikes before a pause. 

The AUD/NZD also pulled back because of the ongoing decline of key commodity prices, including natural gas and iron ore. Data shows that iron ore prices have slumped to their lowest levels since 2020 as the Chinese economic recovery slows. This is important because of the vast amount of iron ore that Australia ships abroad. 

AUD/NZD forecast 

The 4H chart shows that the AUDNZD price has been in a bullish trend in the past few weeks. This recovery, has, however, slowed down recently. A closer look shows that the chart has formed a rising wedge pattern that is shown in black. In price action analysis, a wedge is one of the most accurate reversal patterns. 

Therefore, with the wedge nearing its confluence level, there is a likelihood that the pair will have a bearish breakdown down soon. If this happens, the next key level to watch will be at 1.0900 followed by 1.0800. A move above the resistance level at 1.1025 will invalidate the bearish view.