Synopsis:

ANZ outlines why they see near-term dips in AUD/NZD as buying opportunities, with the pair likely to test the 1.065–1.07 range before resuming an upward move. The bank highlights that a re-pricing of relative rate expectations and potential Australian data surprises should support the cross.

Key Points:

• Rate Expectations Misaligned with ANZ Forecasts:
  • Markets currently price ~90bp of cuts for the RBA vs. only ~40bp for the RBNZ.
  • ANZ sees the RBA easing just 50bp more while the RBNZ delivers 75bp – suggesting yield differentials should support AUD/NZD upside once the market adjusts.

• Relative Economic Surprises Matter More:
  • While New Zealand’s data surprises have been more upbeat recently, Australia’s have lagged with stagnating GDP and employment.
  • A turn in Australia’s data surprises will be key to drive the pair higher.

• Levels to Watch:
  • ANZ does not see a return to the 1.10+ zone in the near term.
  • Instead, they expect near-term downside to test the 1.065–1.07 area, which they flag as an attractive level to add AUD/NZD longs.

Conclusion:

ANZ remains constructive on AUD/NZD medium term, anchored by rate re-pricing and yield differentials once markets align with their forecasts. However, the cross may first test the 1.065–1.07 zone, offering a tactical opportunity for investors to buy dips ahead of an expected recovery.