AUD/NZD to remain in the 1.04-1.11 range for the foreseeable future - BNZ

According to the  NAB FX Strategy Team, the AUD/NZD pair is likely to continue to move in the 1.04-1.11 range. They noted that if the current slide continues, support is likely to appear closer to the 1.04-1.05 area.

Key Quotes: 

“AUD/NZD has been in a downward trend for the past six months. The first part of the downturn was the  fading of NZ political risk late last year; the second part might well be linked to poor AUD sentiment as  US-China trade tensions escalate”

“Support is likely to build if the cross continues to drift lower. Trading in the expectation that the cross will be largely confined to a 1.04-1.11range has proven to be a profitable strategy over recent years and hedging strategies for exporters and importers  can continue to take advantage of this.”

“In assessing fundamental forces on the cross rate, our favorite factors are relative Australia/NZ unemployment rates, relative interest rates and relative commodity prices. These do a good job over time in explaining variations in the cross rate.”

“Our economic projections show downside potential for both the Australian and NZ unemployment rates through the next year, keeping the gap within its recent range and consistent with the cross rate continuing to range trade.

“Our prevailing view for this year has been that the cross will trade largely within a 1.06-1.11 range with brief skirmishes outside of the range likely. If the current downward trend continues, we’d suggest that support would build as we get closer to the 1.04-1.05mark.”

“Since 2014, the cross has traded within a 1.04-1.11 range for over 80% of the time. When we look at fundamental forces, we see this range remaining in play for the foreseeable future.”