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Mazen Issa, Senior FX Strategist at TD Securities, is biased to NZD weakness on the crosses, particularly AUD/NZD, following comments from the Reserve Bank of new Zealand (RBNZ) that suggest more easing is in the pipeline.

Key quotes

“On the one hand, the RBNZ has signaled that a ‘least regrets approach to thinking how much stimulus to deliver’ is a clear indication that the central bank is readying the stimulus canon. On the other hand, the NZD is also a beneficiary of the reflation trade in a Biden/blue wave administration.” 

“With USD positioning leaning short again, we think there is better value to bet on NZD weakness off a dovish RBNZ on the crosses.” 

“We think AUDNZD topside makes sense and we look for a run towards 1.1050. In our FX monthly, we highlighted that we would engage in AUDNZD longs on a dip towards 1.0750. Admittedly, that position may have run away from us in the last couple of days. Nonetheless, we think AUD/NZD dips should be faded from here in anticipation of the RBNZ decision next month.”