AUD/NZD rose on Wednesday after the RBNZ kept policy unchanged but struck a dovish tone. That triggered NZD selling. The RBA is still more hawkish, with its cash rate at 3.85% versus 2.25% in New Zealand. The RBNZ has also signalled that any further tightening is unlikely before late 2026. Australia’s Q4 Wage Price Index increased 0.8% month on month, keeping inflation in focus. Next on the calendar are Australia’s jobs data on Thursday and a speech by Governor Breman.

Policy Divergence And Market Reaction

AUD/NZD jumped 0.8% to 1.1807, its highest level in 12.5 years. The move extended the rally from around 1.1550 and kept the pair well above the 200-day EMA near 1.1340. The Stochastic Oscillator is in overbought territory, which often signals a potential pause. Key support sits near 1.1710 and at the 50-day EMA (1.1607). If the pair holds above 1.1800, the 1.1900 level stays in view. Key NZD drivers include RBNZ policy (targeting 1% to 3% inflation, centred around 2%), China-linked demand, and dairy export prices. Broader risk sentiment can also move the NZD, and rate differentials can influence NZD/USD. The large policy gap between the Reserve Bank of Australia and the Reserve Bank of New Zealand is the main driver right now. The RBNZ’s dovish hold widened that gap, making the Australian dollar more attractive than the New Zealand dollar on fundamentals. This divergence is likely to remain the key force behind AUD/NZD for the foreseeable future.

Australia Jobs Data And Forward View

We have now seen Australia’s latest jobs report, and it supports this view. The unemployment rate unexpectedly fell to 3.8%, and the economy added more than 40,000 jobs. A strong labour market like this can keep pressure on the RBA to stay hawkish in its fight against inflation. That contrasts with New Zealand, where the central bank has indicated it is finished tightening. At the same time, the outlook for key Kiwi-dollar supports is weakening. China’s latest manufacturing PMI came in at 49.2, which signals contraction in New Zealand’s largest trading partner. In addition, global dairy prices have dropped more than 5% across the first few auctions of 2026, which reduces New Zealand’s export income. After the sharp rally above 1.1800, the pair looks technically overbought. This raises the chance of a modest pullback or a period of consolidation. For that reason, it may be better not to chase the move at current levels, and instead look to buy on dips. The broader fundamental case for a higher AUD/NZD remains intact, so any weakness may offer an entry opportunity. Over the coming weeks, we see buying AUD/NZD call options as a sensible approach. This can provide exposure to a potential move toward 1.1900 while limiting downside to the premium paid. A strike near 1.1850 with an April 2026 expiry should allow enough time for the uptrend to reassert itself. We are watching the 1.1710 area as an important support zone for potential entries. Traders should also pay attention to Governor Breman’s upcoming speech. We expect the dovish tone to continue, but any surprise remarks could still create short-term volatility. Create your live VT Markets account and start trading now.

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