NZD/AUD rise should be limited to the 0.92-0.94 area - Westpac

According to Imre Speizer, Research Analyst at Westpac, NZD/AUD cross’s four-week rise looks corrective and should be limited to the 0.92-0.94 area (based on technical retracement levels).

Key Quotes

“The main explanation for the rise appears to be the 22% fall in iron ore prices, which has hurt the AUD.”

“The event calendar this week includes building approvals (Tue), trade balance and retail sales (Thu). The highlight will be the RBA statement on Tuesday. Monday is a Sydney holiday. The RBA should retain its upbeat growth view, though there is no reason to expect a hawkish tone. Data should be mixed – trade potentially supportive, retail muted given consumers’ struggles.”

“3 months ahead: Fair value for the cross is around 0.89. We see that as a fair target for the remainder of 2017. Supportive of the AUD are the rebound in iron ore prices and positive Chinese economic data., while the RBNZ’s on-hold stance (arguably even more entrenched than the RBA’s) is chipping away at NZ’s yield advantage.”