The Australian dollar's steep selloff against its New Zealand counterpart is set to slow, with analysts saying Australia's higher interest rates and a key technical support will cushion the currency. Strategists note the rate differential between the two nations has widened significantly in recent months, providing fundamental support for the Aussie at current levels.

The AUD/NZD cross has fallen sharply as markets priced in aggressive easing from the Reserve Bank of Australia while the Reserve Bank of New Zealand maintained a more hawkish stance. However, technical analysts point to strong support around the 1.0800 level, which has held multiple times this year.

"The rate gap is now wide enough that further downside looks limited," said a senior currency strategist at a major Australian bank. "We're seeing real money accounts step in at these levels." The strategist added that commodity price resilience, particularly in iron ore, provides additional downside protection for the Australian dollar.

Markets will closely watch upcoming employment data from both countries for clues on the policy outlook. A strong Australian jobs report could reinforce the view that the RBA will keep rates higher for longer, potentially triggering a relief rally in the cross.