AUD/NZD Price Forecast: Aussie rally shows signs of exhaustion ahead of RBA decision

The Australian Dollar (AUD) has been trading flat around 1.2390 against the New Zealand Dollar (NZD) on Monday, awaiting the Reserve Bank of Australia's (RBA) interest rate decision on Tuesday. The pair has surged since mid-August, reaching 13-year highs at 1.2491 last week, but technical indicators indicate growing exhaustion among bulls.

The Reserve Bank of Australia is expected to hike its benchmark rate to a 15-year high at 4.6%, but concerns over inflation risks and weakening economic growth make the situation challenging for the central bank. In contrast, the Reserve Bank of New Zealand has more room to tighten monetary policy, as its benchmark rate is currently at a more moderate 2.75%.

However, the RBNZ's dovish stance after its latest decision has prevented the Kiwi from appreciating further. The AUD/NZD pair is currently at 1.2391, consolidating gains after a more than 4% rally in August and September. Warning signs for bulls include the bearish divergence on the 4-hour Relative Strength Index (14) and a flattening Moving Average Convergence Divergence (MACD) near the zero line.

Support is expected at 1.2370 (September 16, 24 lows), followed by the 1.2270 and 1.2285 (September 7 and 11 lows) levels. A potential upside target is the 1.272% Fibonacci extension of the rally at 1.2615.