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7 Jan 2015
AUD/NZD bids line up on weakness in 1.03 handle
FXStreet (Guatemala) - Analysts at Westpac Banking corporation noted how AUD/NZD made a further record low at 1.0393 overnight.
Key Quotes:
“…continues to trade heavily”.
“The key driver appears to be ongoing weakness in oil markets and increasing risk aversion".
"The positive correlation between oil and AUD/NZD that existed through the 2008/2012 period looks like it is resuming. Thus, weak oil implies downside risks for AUD/NZD, noting that Australia is a net energy exporter given the importance of LNG”.
"Certainly, on the basis of short term fair value models, AUD/NZD should be trading closer to 1.08/1.09 rather than the current 1.04. The recent bounce in iron ore prices and stabilisation yield differentials in favour of AUD is the key driver here. Yet AUD/NZD has continued falling”.
"We are not yet at extreme oversold levels given the residual of our models. However a drop towards 1.03 would take our residual to extreme lows, suggesting weakness to this level should be seen as an opportunity to buy”.
“Bottom line, we have been stopped out of our long AUD/NZD recommendation, but are still looking for better levels to buy”.
"As long as crude markets remain on the back foot/ risk aversion increases, we may yet see a final push towards 1.03 on AUD/NZD. Such weakness remains a buy in our view”.
Key Quotes:
“…continues to trade heavily”.
“The key driver appears to be ongoing weakness in oil markets and increasing risk aversion".
"The positive correlation between oil and AUD/NZD that existed through the 2008/2012 period looks like it is resuming. Thus, weak oil implies downside risks for AUD/NZD, noting that Australia is a net energy exporter given the importance of LNG”.
"Certainly, on the basis of short term fair value models, AUD/NZD should be trading closer to 1.08/1.09 rather than the current 1.04. The recent bounce in iron ore prices and stabilisation yield differentials in favour of AUD is the key driver here. Yet AUD/NZD has continued falling”.
"We are not yet at extreme oversold levels given the residual of our models. However a drop towards 1.03 would take our residual to extreme lows, suggesting weakness to this level should be seen as an opportunity to buy”.
“Bottom line, we have been stopped out of our long AUD/NZD recommendation, but are still looking for better levels to buy”.
"As long as crude markets remain on the back foot/ risk aversion increases, we may yet see a final push towards 1.03 on AUD/NZD. Such weakness remains a buy in our view”.