TD Research notes that the FX market is likely to consolidate ahead of the Fed tomorrow, while flagging a scope for further downside in AUD/NZD in anticipation of another RBA cut at the central bank coming policy meeting.
"It seems dovish central banks can boost carry trades in the very short-run with ZAR, TRY and NZD the top performers on the day. AUDNZD is pushing back to the key 1.05 level while EURJPY grinds lower too," TD notes.
"The pullback in AUDNZD probably reflects scope for the RBA to cut rates again at the June meeting. We continue to think that AUDNZD downside is the best way to play the RBA in the very near future. Elsewhere, the markets are likely to consolidate ahead of the Fed tomorrow where many hope the Powell leaves the cut narrative unchanged," TD adds.