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Here are specific remarks or data shifts that could mark a significant deviation — and how markets might react:
Topic | What changed remark / data to look for | Likely market impact |
|---|---|---|
Inflation assessment | If the statement upgrades inflation risks (e.g. “inflation has proven more persistent than anticipated,” “we see upside risks from energy, services, import cost pressures”). The August statement notes inflation has eased as expected into the 2-3% range. | That would make the RBA more cautious about cuts and could support AUD strength / flatten AUD weakness |
Guidance on future easing / timing | Any stronger language indicating sooner cuts (e.g. “if conditions evolve, we may ease in November / December”) versus previous “hold and monitor” | A more dovish forward guidance helps push rate expectations lower, weakening AUD crosses |
Labor market / wage pressures | If the RBA expresses more concern about lingering wage growth or labor market tightness than it did in August. The current assessment is that the labor market has "eased slightly but capacity constraints remain." An upward revision to wage forecasts would be a key trigger. | That would temper markets’ expectations of aggressive easing, giving support back to AUD |
Global / external risk language | If the statement amplifies concerns about a global slowdown, particularly regarding China or the impact of US tariffs. The August view was that the risks of a "damaging trade war appear to have diminished somewhat," though the outlook remains skewed to the downside. | Strengthening the external risk narrative supports a cautious or dovish tone; less risk talk would allow more hawkish posture |
Electricity rebates & administered price reversal | In prior statement, rebates had depressed headline inflation; if this reversal is flagged earlier or larger than expected, that would suggest inflation could reaccelerate | That could push RBA to delay cuts or remain more restrictive |
Change in conditionality / “if” to “when” phrases | If RBA moves from “if economic conditions warrant” to “when” or similarly more deterministic language about cuts.. The August statement is firmly in the conditional camp. | A more committed tone toward cuts would boost market expectations of cuts |
Monetary policy reaction function | If they provide a clearer path (e.g. number of cuts, timing) or narrow the range of uncertainty | More clarity leads to more confident market positioning and potentially sharper AUD moves |
Q&A tone shift / less equivocation | In the press conference, if the Governor or Board is more definitive (less “depends on data,” more “likely to” or “we expect to”) | That transparency or conviction would strengthen or weaken AUD depending on direction |
Forecast or baseline revisions | Upgrades/downgrades to growth, inflation, employment forecasts relative to the last statement. The current forecasts are for GDP growth to reach 2.1% by late 2026, unemployment to stabilize at 4.3%, and trimmed mean inflation to remain around 2.6%. | A more cautious growth outlook might lean dovish; upward inflation revisions might push a more hawkish tilt |
Given recent developments, here are three possible scenarios:
Base scenario (most likely): The RBA holds at 3.60 %. The statement reaffirms the cautious, data-dependent posture. Slight upward tweaks to inflation risks or external uncertainty may be added, but no strong shift. The press conference is moderate, signaling openness to easing but with caution.
Dovish surprise scenario: The RBA hints that cuts may resume earlier (or states that easing will be more aggressive than markets thought). Also, a stronger downgrade to growth forecasts or emphasis on downside risks. In press conference, Governor leans into accommodative stance.
Hawkish-leaning surprise scenario: The RBA pushes back on market expectations for cuts, emphasizing persistent inflation risk, stronger wages, or tighter labor market. The forward guidance becomes more conditional or delayed. In press conference, there is more hesitation or guarded optimism rather than commitment.
No updates have been posted for this trade yet.
No updates have been posted for this trade yet.
No updates have been posted for this trade yet.
No updates have been posted for this trade yet.
No updates have been posted for this trade yet.
No updates have been posted for this trade yet.
No updates have been posted for this trade yet.
No updates have been posted for this trade yet.
No updates have been posted for this trade yet.
No updates have been posted for this trade yet.
No updates have been posted for this trade yet.
A combination of slightly diverging fundamentals and a technical break on the chart suggest further downside is likely.
The bearish sentiment is largely driven by different economic and monetary policy expectations for the two countries.
Diverging Central Banks
New Zealand central bank RBNZ has made dovish remarks last monetary policy announcement, it cut its interest rate in an effort to jumpstart a faltering economy. Unlike the Bank of Canada, which is adopting a more wait-and-see approach. With Canadian inflation near target and its economy more robust, the interest rate spread should favor the CAD.
Economic Performance Gap
New Zealand's economy is displaying signs of stress, with domestic demand slowing and unemployment increasing. Although Canada's economy is also slowing, it seems to be on track for a softer landing, aided by a more stable labor market and a housing sector that has surprised to the upside.
The story is straightforward: a central bank actively easing policy to help a soft economy (New Zealand) compared with a central bank on hold with a more stable economy (Canada). That divergence provides a bearish outlook for the NZD/CAD.
The Chart Validates the Bearish Scenario
Established Downtrend: The pair has been making consecutively lower highs. This is a classic technical formation that is a clear signal that sellers are in charge and that buying momentum is disappearing with every attempt at a rally.
Critical Support Break: The most significant recent development was the definitive break of a key support level in the 0.8115 area. This level had held on multiple occasions since June, but the breakdown of this level likely paves the way for a more decline.
Support Turns Resistance: Since the breakdown, price has pulled back slightly higher to test this former broken support area. if price cannot retake this level, it confirms the breakdown.
Downside Targets: Now that the bearish structure is in place, the potential initial target is in the 0.8020-0.8030 area. This area corresponds with Fibonacci retracement and extension levels.
Bottom line
When technical and fundamental analysis converge, it forms a high-conviction trade. The underlying narrative of diverging monetary policies offers the "why" of NZD weakness , while the technical breakdown on the chart provides potential future price action.
With the RBNZ's easing cycle and the clear bearish price structure on the chart, the path of least resistance for NZD/CAD appears to be lower. Not being able to break the new resistance around ~0.8115 would most likely see the pair decline towards the first target area of 0.8020-0.8030 in the next couple of weeks.
Remember, nothing is guaranteed in this market... trade with care.
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