AUD/NZD: Scope For A Slip Into 1.02 Next Week: Use To Reload Longs – ANZ

AUD/NZD will come into sharp focus in the week to come as it approaches key support levels once again.

Our concern is that it could once again slip back towards the 1.02 level. However, we think this level should be used to re-accumulate long positions.

The primary source of our concern is the fact that next week looks to be absent any independent drivers of AUD strength, with a very light data calendar. All drivers of the AUD will be global in the next week, and these should impact on the NZD in a similar way. As such, the scope for AUD/NZD to find support at current levels is somewhat limited.

On the flip side, the RBNZ meeting presents a real risk for the NZD, and an upside move cannot be discounted there. We, like the market, expect the RBNZ will cut rates for the final time in this cycle at the meeting. However, given the strength that the economy is presenting, and the nascent signs of a trough in inflation which are emerging, we think the Bank will have to soften its rhetoric around the currency to some degree. This could drive a rally in the NZD and by extension push the cross lower once again.

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