Synopsis:

ANZ provides a cautious outlook for AUD and NZD in the coming week, highlighting consolidation in AUD/USD, the impact of the RBNZ rate cut on NZD, and the role of risk sentiment in driving currency performance. Both currencies are expected to face limited movement without significant global developments.

Key Points:

• AUD Consolidation: AUD/USD has been consolidating in a tight range, struggling to move above 0.66. The ANZ Risk Appetite gauge has returned to neutral, suggesting limited gains for AUD and NZD without significant positive data or events.
• Investor Sentiment: Net buying of AUD has stabilized, indicating reduced enthusiasm as market conditions normalize. Support levels at 0.655 and 0.65 are expected to hold, but further gains may be capped.
• RBNZ Rate Cut Impact: The recent RBNZ rate cut led to a sharp decline in NZD, in line with historical reactions. However, this downside is expected to be short-lived, with global trends likely to drive NZD/USD direction.
• Medium-Term Outlook for NZD: ANZ expects NZD/USD to recover in Q4, supported by lower interest rates and stronger risk assets. Seasonal trends favor a year-end pick-up in NZD, particularly against CAD.

Conclusion:

ANZ adopts a neutral to mildly bearish stance on AUD and NZD in the near term, with expectations of tight trading ranges and limited upside without significant global developments. Medium-term recovery is anticipated for NZD, particularly towards year-end, while AUD is expected to consolidate within a narrow range.