• In the short term, there are some glimpses of positives for AUD/NZD.
• Those include; (i) shifting perceptions of RBA, (ii) stretched market pricing of RBNZ rate hikes, (iii) China fears having eased providing the AUD with some breathing‐room & (iv) Australian macro data holding up against expectations in the short‐term.
• The 1.12 area remain key for AUD/NZD (as it received support around the 1.12 level several times previously) and may work as a floor on the downside for now. With that said, the spot is still only 1.2% off the 1.12 level, and a downside break would of course be a bearish shift, and alter the near‐term outlook.
• Longer‐term, we remain cautious on AUD/NZD longs given the diverging stance between RBA (on hold with the door still open for cuts) and RBNZ (planning to initiate a hiking cycle).
• We think it might be premature to completely rule out additional rate cuts by RBA given that several Australian macro risks still exist, including labour market developments, inflation and mining.
Read full report: FX Research
Nordea