TD Research discusses AUD/NZD outlook in light of holding its long position* with a stop at 1.03 targeting a move towards 1.0950.
"We are still (frustratingly) long AUDNZD largely as a mix of bottom-up and top-down drivers argue it should be higher. Some of these are nestled into our HFFV, which points to 1.05. It explains about three-quarters of the moves in the cross and factors like terms of trade point to a level around 1.08. The residuals could be factors like positioning, China or a global component that gets missed in the common inputs," TD notes.
"Our China proxy has seen AUDNZD fair value rise, which implies a move to 1.074. Momentum is critical too. We capture that in our CTA implied positioning model that shows NZD at neutral levels, though again we highlight that AUDNZD is not a trade on relative central bank policy," TD adds.
*Recorded in eFXplus Orders