The Australian and New Zealand economies depend on different commodities and not always trade in tandem.
The team at Credit Suisse sees a clear direction for the cross:
Here is their view, courtesy of eFXnews:
“Our technical analysts still see the bias of risk to the downside, targeting a test of the 200-day average support at 1.0749/699 initially, before the 61.8% retracement of the April/June rise at 1.0562/34.
Fundamentally, dairy price outlook has improved, and RBNZ is close to fully unwinding its 2014 tightening. We still expect one more cut this year, in line with market pricing, but the barrier for further easing in 2016 may be higher.
However, we think several factors will prevent a sharp move lower in the cross. 1) Our expectations for better China data momentum in the coming months may lead the market to pare back expectations for near-term RBA’s cuts. 2) Concern on the effects of El Nino in New Zealand may prompt RBNZ to stay on the dovish side. 3) AUDNZD is already moderately cheap to interest rate spreads and commodity prices,” CS argues.
“Overall, our expectation appears consistent with a shift in AUDNZD trading range lower, perhaps to 1.06-1.10 from 1.09-1.14 earlier,” CS concludes.
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