NZD/AUD: Break below 0.9300 area likely to result in a move towards 0.8800 area - Westpac

Imre Speizer, Research Analyst at Westpac, explains that the NZD/AUD cross tested and eventually broke below key support at 0.9280 last week and if it remains below that level this week, the technical case for an eventually much lower cross will be strong.

Key Quotes

“Recent AUD themes remain very much intact: commodity prices point to AUD/USD in the high 0.70s/ near 0.80; global risk sentiment is also very supportive; and the RBA is looking on the bright side of mixed domestic data, keeping rate cut talk at bay. We note the cross has moved towards”fair value” during the past month but still has much work to do.”

“This week the RBA statement (Tue) will be perused as ever but there is no tension over the cash rate. Jan retail sales (Mon) is the key data release to watch.”

“3 months: Eventually we see NZD/AUD starting to reflect the outperformance of AU commodities as well as better AU economic data ahead. We expect a break below the important 0.9300 area, paving the way for a move towards the 0.8800 area multi-month. Coincidentally, 0.8800 is close to fair value according to our model which captures interest rates, commodities, and risk sentiment.”