ANZ Research likes long AUD/NZD exposure in spot around current levels targeting a move towards 1.05.
"AUD/NZD has been particularly exposed to divergent monetary policy expectations between the RBA and RBNZ, and some structural adjustments in China that are weighing on hard commodities," ANZ notes.
"On balance, we think some of the downside risks for AUD/NZD are beginning to ease. Firstly, while the RBNZ’s anticipated hikes (25bp in October and November, ~50bps through H1 2022) are well priced, Australia’s high vaccination rates should set the foundation for a Q4 recovery. On China, we think the AUD should see some stabilisation as markets re-assess property contagion risks," ANZ adds.