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Apr 05 - 10:55 AM

ANZ: Looking for Opprunitinimes to Sell AUD/NZD Ahead of RBNZ Meeting with 1.07 Target

By eFXdata  —  Apr 05 - 09:30 AM

Synopsis:

ANZ advises investors to consider selling AUD/NZD in anticipation of next week's RBNZ meeting, targeting a move towards 1.07. The recommendation is based on the observation that the NZD's underperformance is largely priced in and the AUD/NZD pair is reaching the upper bounds of its recent trading range, signaling a potential for reversal.

Key Points:

  • Economic Outlook Disparity: The economic prospects between Australia and New Zealand diverge, with Australia showing a stronger outlook. This discrepancy has influenced the AUD/NZD pair's direction but is approaching levels where historical precedents suggest limited upward movement.

  • Impact of RBNZ Meeting: The forthcoming RBNZ meeting is not expected to adversely affect the NZD. Previous instances where the RBNZ opted against rate hikes have typically resulted in NZD strength, contributing to AUD/NZD declines. Conversely, RBNZ rate hikes have sometimes led to NZD sell-offs.

  • Technical Indicators: The AUD/NZD pair is significantly overbought according to the Relative Strength Index (RSI), reaching a peak not observed since August 2020. This level of overbought condition has historically preceded notable reversals.

  • Historical Context: The analysis considers the historical behavior of the AUD/NZD in response to RBNZ decisions, suggesting that the current market positioning and technical setup favor a short position.

Conclusion:

With the AUD/NZD pair nearing the upper limit of its recent trading range and showing signs of overbought conditions, ANZ sees an opportunity to sell, particularly in light of the upcoming RBNZ meeting. The bank's analysis points to a potential for the NZD to benefit from the meeting outcomes, driving the AUD/NZD towards their 1.07 target. Investors are encouraged to closely monitor the RBNZ meeting and adjust their positions accordingly.

Source:
ANZ Research/Market Commentary

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