AUDNZD: Eyeing upside potential – TD Securities

“After 75bps of easing in 2019, the RBA has signaled a long pause is likely. Governor Lowe reinforced this recently,” TD Securities analysts pointed out in their latest analysis for the AUD/NZD pair.

Key quotes

“Interestingly, the RBA opted to leave its growth forecast unchanged and instead take on a cautiously upbeat view with recent interruptions from the virus and global trade as temporary. Markets seem to have embraced this too.”

“Assuming this is the case, the AUD is positioned to be a unique beneficiary — at least on certain key crosses — over the medium term. We have already dabbled in tactical AUD longs vs GBP. AUD should regain its footing vs. low funders should risk stabilize further. We now think a case is building for AUDNZD topside as the pair managed to hold crucial support near 1.03.”

“NZD remains starved of foreign capital flows. Meanwhile, AUD has benefited from an LNG boom that has helped to push a trade surplus. Notwithstanding a temporary shock from the virus, this offers AUD a competitive advantage over NZD, especially as the latter runs rich on our long-term valuation models. We will look to buy AUDNZD on a dip towards 1.0350/1.0400. The 200dma at 1.0555 will be the gateway to a larger move towards 1.08/1.09.”