AUD/NZD erases early gains but holding above 1.0700 handle

The AUD/NZD pair erased all of its early morning gains to 1.0783 (7-day SMA) and has now dipped below Friday's closing level of 1.0731 to 1.0727.

The relative out-performance of the Kiwi against the Aussie is occurring just ahead of the RBA monetary policy meeting minutes and the RBNZ’s survey of quarterly inflation expectations releases during early Asian trading session on Tuesday. The RBA minutes will be looked upon for some extra information on the factors affecting central bank's decision to announce a surprise interest rate-cut on May 3. Meanwhile a decline in inflation outlook is likely to fuel speculation of further interest rate cuts and dent demand for the Kiwi.

From technical perspective, the pair on Friday dropped to its lowest level since late Feb. A follow through weakness below this 1.0680-70 support area might trigger further near-term depreciating move for the pair.

Technical levels to watch

Below 10.680-70 support, the pair easily seems to drift back to 1.0580-70 support, marking lows tested earlier in Feb. and Jan. this year. The momentum could further get extended towards Oct. 2015 lows support near 1.0520-1.0500 region.

On the flip side, the pair needs to sustain its strength above 1.0765-75 immediate resistance in order to increase prospects of any further recovery. A convincing break through 1.0765-75 resistance seems to open room for a further up-move towards 1.0870-75 resistance with 1.0840 acting as intermediate resistance.