Market outlook for antipodeans - Westpac

Analysts at Westpac offered a market outlook for the antipodeans.

Key Quotes:

"AUD/USD 1 day:  The US dollar continues to rise, and Asian currencies continue to perform poorly, helping push AUD/USD lower. We target the 0.7300 area next (mid-late June lows).

AUD/USD 1-3 month: The US dollar has had an impressive rise since the US election and has potential to rise further, not least because the Fed will probably hike in December. Against that, coal and iron ore are more likely to sustain their dramatic rises during the months ahead. We target 0.72. (21 Nov)

NZD/USD 1 day: The US dollar continues to rise, pushing NZD/USD lower. We target the 0.6950 area (21 July low) during the week ahead.

NZD/USD 1-3 month:  The US dollar has had an impressive rise since the US election and has potential to rise further, not least because the Fed will probably hike in December. Against that, the NZ economy is strong and dairy prices have risen. Overall we are left with a bearish outlook, targeting sub-0.70. Technicals suggest as low as 0.66 could be seen, courtesy of the head-and-shoulders break below 0.7060. (21 Nov)

AUD/NZD 1 day: This decline looks corrective and could run as far as 1.0365, which is a 76% retracement of the Sep-Oct rally.

AUD/NZD 1-3 month: Higher to 1.0750 or above. The cross remains well below fair value estimates implied by interest rates, commodity prices and risk sentiment. (22 Nov)

AU swap yields 1 day: The 3yr and 10yr should open around 1.97% and 2.81%, respectively.

AU swap yields 1-3 month: The 2yr base at 1.60% should hold during the next few months (barring an offshore-sourced shock), with the RBA expected to sit tight at 1.5% for some time. (7 Nov)

NZ swap yields 1 day: NZ 2yr swap rates should open unchanged at 2.27%, the 10yr at 3.27%.

NZ swap yields 1-3 month: The RBNZ ended its easing cycle on 10 Nov and will now remain on hold for a long time. That will anchor the short end somewhat (although the 2yr-OCR spread – one measure of stretchedness – has been even higher than the current 50bp during past on-hold periods), with the long end free to follow offshore yields. The curve steepening trend should continue."