Short AUD/NZD: A Kiwi Can Fly above a Kangaroo – Nomura
Research Team at Nomura, suggests that while there is already a cut
priced into the AUD curve for the October meeting, and 1.8 cuts priced
into to May of next year, this is not aggressive enough in our view.
“We expect the next move from the Reserve Bank of Australia (RBA) to be another cut in August and a second after that in November. The RBA minutes on Tuesday and the Australian employment report on Thursday could prove to be events that confirm the markets view for further easing.
Rate cuts and data aside, the terms of trade is a big driver of change in AUD/USD and NZD/USD and, as a result, has a big influence on AUD/NZD. We believe the relative terms of trade should fall in coming months, putting downward pressure on AUD/NZD.
We recommend short AUD/NZD positions at 1.0747 and target 1.06 with a stop at 1.09.”