– The NZD/AUD has come a long way and is almost ‘expensive’ on a fundamental fair-value basis. This raises the risk of a pause or backup in the uptrend, with next week’s RBA meeting a possible catalyst.
– But any dip is expected to be shallow and short-lived, reflecting supportive NZ-AU growth, commodity price and interest rate dynamics. We doubt support at 0.8150 will be breached.
– We have this morning taken profit on our strategic NZD/AUD long position, entered at 0.7960, for a 4.1% return. We’d use any post-RBA sell-off as an opportunity to re-enter a long position.
– We continue to look for the NZD/AUD to hold around 0.8300 through Q3, and appreciate to 0.8500 in Q4.
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BNZ