NZD/AUD looks poised to head towards the historical high zone of 0.98-1.00 - Westpac

Imre Speizer, Research Analyst at Westpac, suggests that the NZD/AUD cross eventually broke above the sticky 0.97area last week and now looks poised to head towards the historical high zone of 0.98-1.00.

Key Quotes

“Weighing on the AUD is its declining and slim yield advantage over other major currencies. The deterioration in risk sentiment, if it persists, will probably also hurt the AUD more than the NZD. Australia’s data calendar becomes steadily more market-sensitive over the week. On Tue it’s the Aug NAB business survey. This will be interesting to compare to the odd collapse in Aug PMIs. Sep consumer sentiment (Westpac/MI) is Wed but as always, employment is the highlight, with Aug data due on Thu.

3 months: We target sub-0.92 multi-month because the cross is trading well above fair value implied by relative interest rates, commodities and risk sentiment and needs to correct this deviation eventually. In addition, if the RBNZ signals a deeper easing cycle than the RBA, interest rate differential changes will favour the AUD over the NZD.

1 year: Our economic fundamentals based forecast is 0.92.”