NZD/AUD: Recent rise should be limited to the 0.92-0.94 area - Westpac

The NZD/AUD cross’s recent rise looks corrective and should be limited to the 0.92-0.94 area (based on technicial retracement levels), suggests Imre Speizer, Research Analyst at Westpac.

Key Quotes

“NZ government uncertainty, postelection, and the recent fall in iron ore, are offsetting factors in the near term. Iron ore futures prices in Shanghai have fallen almost without interruption this month, to lows since late July. Coal is holding up better but overall, Australia’s key commodity prices reinforce our AUD fair value model’s warning that there is probably greater downside risk than upside risk for the AUD.”

“The event calendar this week is effectively empty. RBA commentary will be wary ahead of 3 October Board meeting.”

“3 months ahead: Fair value for the cross is around 0.89. We see that as a fair target for the remainder of 2017. Supportive of the AUD are the rebound in iron ore prices and positive Chinese economic data., while the RBNZ’s on-hold stance (arguably even more entrenched than the RBA’s) is chipping away at NZ’s yield advantage.”