May 16 (Reuters) -

AUD/NZD could extend its rally to levels not seen since 2022 following the recent easing of U.S.-China trade tensions. This month's central bank meetings in Australia and New Zealand offer a window of opportunity.

Despite fundamentals favouring AUD, NZD outperformed in the aftermath of President Donald Trump's 'Liberation Day' tariffs as China responded with measures that included restricting U.S. agricultural imports.

Both countries have limited direct exposure to the tariff conflict, but New Zealand's agriculture-led export mix makes it a viable alternative supplier for China. While AUD performed admirably post-'Liberation Day', its exports - predominantly mining commodities - are more sensitive to economic growth concerns.

As cooling trade tensions unwind this thematic, AUD is quickly reclaiming ground against NZD. A short-term rise above 1.10 is highly likely, with next target 1.1180 resistance.

The Reserve Banks of both Australia and New Zealand are anticipated to continue cutting interest rates throughout 2025. However, New Zealand's economy appears to require more stimulus, despite improvement. For instance, its 5.1% unemployment rate compares unfavourably to Australia's tight labour market.

The positive interest rate differential in Australia's favour (4.1% versus New Zealand's 3.5%) will support AUD/NZD in the months ahead. A deterioration in the U.S.-China trade situation would impact the cross, but if the status-quo is maintained, long-term resistance at 1.1490 becomes a distinct possibility.

With the RBA likely to cut rates by a quarter-point on May 20, there may be a short-lived opportunity to buy AUD/NZD before the RBNZ follows suit on May 28.
AUDNZD Daily Double-Top Resistance


AUDNZD Weekly Long-Term Resistance

(James Connell is a Reuters market analyst. The views expressed are his own. Editing by Sonali Desai)