REFILE-Australia, NZ dollars brace for big central bank week as bulls eye more upside

By Stella Qiu

SYDNEY, Sept 15 (Reuters) - The Australian and New Zealand dollars were bracing for a big central bank week as the U.S. Federal Reserve is set to resume its policy easing cycle, with the only question being how many more rate cuts there are to come.

The Aussie rose 0.2% to $0.6662 on Monday AUD=D3, just below its ten-month top of $0.6668 hit on Friday. It has rallied almost 4% from its trough in late August, with bulls now eyeing the November top of $0.6687 that will open the way to as far as 67 cents.

"AUD/USD can keep lifting this week because the local and global economic environment is improving," said Joseph Capurso, head of international economics at the Commonwealth Bank of Australia. "AUD/USD is likely to lift through weak resistance at 0.6700."

"The prospect of cuts to U.S. interest rates and income taxes bolsters the global economy, a positive for AUD against the USD and other major currencies."

Markets are 100% priced for an easing of 25 basis points from the Federal Reserve on Wednesday, taking its funds rate to 4.0-4.25%, while a total 125 basis points of cuts have been priced in. 0#USDIRPR

Also helping the Aussie are wagers that the Reserve Bank of Australia will go slowly on policy easing this year following a run of solid domestic data.

Swaps imply little chance the RBA will ease at its meeting this month, while a cut in November, which was seen as a done deal a few weeks ago, is now priced at just 70%. That put much of the focus on local jobs data on Thursday which have been holding strong over the recent months.

The kiwi dollar NZD=D3 was also up 0.2% to $0.5965, after gaining 1.1% last week, although it is nowhere near reclaiming its multi-month top of $0.6120.

All eyes are on the GDP figures due this Thursday, which are likely to show the New Zealand economy shrank by about 0.3% in the June quarter, underscoring the need for more stimulus to kickstart the economy.

The Reserve Bank of New Zealand is widely expected to cut the 3% cash rate two more times by early next year.

"At 3% today, the cash rate remains at broadly neutral levels. A level which has not been enough to spur growth in the economy," said Jarrod Kerr, chief economist at Kiwibank.

"A cash rate below 3%, however, puts stimulus on the table ... With that, the outlook is much brighter."